Untitled document

British Smaller Companies VCT plc Annual Report &

Accounts 1

British Smaller Companies VCT plc

Annual Report

for the year ended 31 March 2023

Transforming small businesses

bscfunds.com

Financial Overview

02 Financial Highlights

03 Five Year Summary

03 Financial Calendar

04 Your Portfolio

Strategic Report

05 Chairman’s Statement

09 Objectives and Key Policies

10 Processes and Operations

11 Key Performance Indicators

15 Portfolio Structure and Analysis

17 Investment Review

23 Case Studies

24 Portfolio Summary

at 31 March 2023

25 Summary of Portfolio Movement

since 31 March 2022

26 Investee Company Information

31 Risk Factors

34 Other Matters

34 Section 172 Statement

Corporate Governance

36 Directors

37 Directors’ Report

41 Corporate Governance

49 Directors’ Remuneration Report

52 Directors’ Responsibilities

Statement

Independent Auditor’s Report

53 Independent Auditor’s Report

Financial Statements

60 Statement of Comprehensive

Income

61 Balance Sheet

62 Statement of Changes in Equity

64 Statement of Cash Flows

65 Notes to the Financial Statements

Company Information

92 Notice of the Annual General

Meeting

Advisers to the Company

CONTENTS

About us

Registered Number:

03134749

British Smaller Companies VCT plc

was formed in 1996. It aims to provide

investors exposure to a diversified

portfolio of UK businesses that offer

opportunities in the application and

development of innovation in their

products and services, across established

and emerging industries.

The portfolio had a valuation of

£123.4 million as at 31 March 2023.

Discover more about

British Smaller Companies VCT plc

www.bscfunds.com

British Smaller Companies VCT plc Annual Report & Accounts

1

Dividend Re-Investment Scheme (“DRIS”)

The Company operates a DRIS which gives

shareholders the opportunity to re-invest any cash

dividends. Currently, dividends are re-invested at the

latest reported net asset value as adjusted for the

relevant dividend in question if this has not already

been recognised. Any dividends that are re-invested

by shareholders are eligible for income tax relief at

30 per cent of the amount invested, subject to an

annual investment limit of £200,000, or, if lower, the

amount of a shareholder’s income tax liability. The

Finance Act 2014 confirmed that shares acquired at

any time under dividend re-investment schemes will

not impact tax relief on sales of, or subscriptions for,

VCT shares, unless in the latter case it results in a

breach of the £200,000 investment limit.

*Under Chapter 3 Part 6 of the Income Tax Act 2007

BRITISH SMALLER

COMPANIES VCT PLC

Transforming small businesses

Share Buy-Backs

Share buy-backs enable shareholders to obtain some

liquidity in an otherwise illiquid market when there is

a need to dispose of shares. This policy is kept under

active review to ensure that any decisions taken are in

the interests of shareholders as a whole. The current

rate of discount at which ordinary shares will be bought

back is targeted to be no more than five per cent of the

latest reported net asset value.

Manager

YFM Private Equity Limited (“the Manager”) is a wholly

owned subsidiary of YFM Equity Partners LLP and is

authorised and regulated by the Financial Conduct

Authority.

Investment Policy

The investment strategy of British Smaller Companies

VCT plc (“the Company”) is to invest in UK businesses

across a broad range of sectors that blends a mix of

businesses operating in established and emerging

industries that offer opportunities in the application

and development of innovation in their products

and services.

These investments will all meet the definition of a

Qualifying Investment* and be primarily in unquoted

UK companies. It is anticipated that the majority of

these businesses will be re-investing their profits

for growth and the investments will comprise mainly

equity investments. Further details of the Company’s

investment policy can be found in the Strategic

Report on page 9.

Dividend Policy

The Board remains committed to achieving the

objective, over time, of paying tax free dividends

from realised investment returns. This depends upon

the level of investment income and realisations that

the Company is able to make or achieve in any one

period and cannot be guaranteed.

The tax reliefs that are available for an investment

in a Venture Capital Trust are of particular benefit

for shareholders as there is no income tax payable

on the dividends received, or need to declare them

in a tax return.

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

2

British Smaller Companies VCT plc Annual Report & Accounts

Financial

Highlights

FINANCIAL OVERVIEW

1. Total Return (“TR”) is defined as an

Alternative Performance Measure. The

Board considers TR to be the primary

measure of shareholder value; it is

calculated as the total of current net

asset value per ordinary share plus

cumulative dividends paid since

inception of the Company.

The Annual Report contains a number of

Alternative Performance Measures

(“APMs”). APMs are financial measures

that are in addition to those defined or

specified in the Company’s financial

reporting framework.

All stated figures above and throughout the

annual report exclude the impact of any tax

benefits that may arise to shareholders due

to the Company’s status as a Venture

Capital Trust.

FUNDS RAISED

£44.3m

for 2022/23

£44.3 million raised in

2022/23 and allotted in April

2023.

DIVIDENDS PAID

8.5p

Total Dividends

Total dividends paid were 8.5

pence per ordinary share,

which equates to 9.9 per cent of

the opening net asset value per

ordinary share.

TOTAL RETURN

1

258.6p

The Company’s Total Return

increased by 6.5 pence, from

252.1 pence per ordinary share

to 258.6 pence per ordinary

share, which includes

cumulative dividends paid of

174.9 pence per ordinary share.

The increase is equivalent to an

annualised return of 7.6 per

cent of the opening net asset

value.

INVESTED

£28.9m

The Company completed a total

of 16 portfolio investments, of

which seven were new

additions to the portfolio.

REALISATION

PROCEEDS

h

6.5p+£6.1m over costfor 2022/23

£20.7m

Realisations of investments

generated total proceeds of

£20.7 million, a gain of £5.2

million over the opening

carrying value and £6.1 million

over cost.

Five Year

Summary

Year ended

31 March

2022

Year ended

31 March

2021

Year ended

31 March

2020

Year ended

31 March

2019

Income £000

1,065

4,074

1,517

2,299

Profit (loss) before and

after taxation £000

28,264

21,339

(5,091)

6,405

Net assets attributable to

ordinary shares £000

159,534

110,360

88,961

82,023

Profit (loss) per ordinary share

18.22p

15.38p

(3.64p)

5.88p

Dividends per ordinary share

paid in the year

9.0p

4.0p

6.0p

11.0p

Net asset value per ordinary share

85.7p

75.8p

64.5p

74.3p

Total Return per ordinary share

1

252.1p

233.2p

217.9p

221.7p

Increase (decrease) in Total Return

per ordinary share

1

18.9p

15.3p

(3.8p)

5.7p

Annualised return

1

Cumulative 3 year increase in

Total Return per ordinary share

1

Annualised 3 year return

1

Cumulative 5 year increase in

Total Return per ordinary share

1

Annualised 5 year return

1

Year ended

31 March

2023

1,994

12,237

157,032

6.54p

8.5p

83.7p

258.6p

6.5p

7.9%

40.7p

19.8%

42.6p

11.0%

1. These are Alternative Performance Measures. The Board considers Total Return to be the primary measure of shareholder value. The

annualised return comprises the cumulative dividends paid plus the NAV at 31 March 2023, compared to the NAV at the

beginning of the relevant period.

Results announced

16 June 2023

Shareholder workshop

20 June 2023

Ex-dividend date

29 June 2023

Record date

30 June 2023

DRIS Election date

14 July 2023

Dividend paid

28 July 2023

Annual General Meeting

14 September 2023

British Smaller Companies VCT plc Annual Report & Accounts

3

Financial

Calendar

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

4

British Smaller Companies VCT plc Annual Report & Accounts

FINANCIAL OVERVIEW

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British Smaller Companies VCT plc Annual Report & Accounts

5

STRATEGIC REPORT

Chairman’s

Statement

It gives me great pleasure to set out

my first Chairman’s Statement for

British Smaller Companies VCT plc

(“BSC” or “the Company”), having

been appointed as Chair at the

Company’s AGM in September.

I thank my predecessor, Helen

Sinclair, for her exemplary service

to the Company over 14 years, both

as director and Chair.

The Company delivered a robust performance in a

demanding economic landscape. In the year to 31

March 2023, the Company generated a 7.6 per cent

total return on its opening Net Asset Value, compared to

a 12.0 per cent fall in the FTSE Small Cap and a 6.7 per

cent fall in the AIC’s index of generalist VCTs’ share

price total return. AIC data ranks the Company first

across all generalist VCTs when considering a blended

average performance ranking over 1, 3, 5 and 10 years.

One notable factor driving this performance was

the number of realisations achieved by the Company

in the year, with four portfolio companies sold, all at

significant uplifts from their opening valuations at

the start of the year.

A second factor has been the good level of revenue

growth seen within the portfolio, particularly amongst

the ten largest investments, which has helped to offset

decreases in valuation multiples as the share prices

of publicly listed comparable companies have reduced.

Financial Performance

In 2023, the Company delivered a 6.5 pence per

ordinary share increase in Total Return which, as noted

above, is equivalent to 7.6 per cent of the opening net

asset value at 31 March 2022. Total Return is now

258.6 pence per ordinary share.

The portfolio drove the positive performance, which

generated a return of £14.2 million, 14.0 per cent over

its opening value; £5.3 million of the return was from

realised investments and £8.9 million from unrealised

investments. New and follow-on investments totalling

£28.4 million were completed.

The Company’s portfolio of externally managed

investments in listed investment funds, which makes

up a small part of the Company’s treasury operations,

saw its valuation fall by £0.8 million in the year; £0.5

million was invested into this portfolio over the course

of the year.

Realisations in the Year

Realisations of investments generated total proceeds of

£20.7 million, a gain of £5.2 million over the opening

carrying value and £6.1 million over the original cost.

There were four significant realisations in the year:

Springboard and Intelligent Office in September 2022,

the partial realisation of Vuealta in December 2022 and

Wakefield Acoustics in January 2023.

The realisation of Springboard generated proceeds of

£8.7 million, representing a capital profit over cost of

£5.9 million, an uplift of 30.7 per cent or £2.0 million on

the carrying value at the beginning of the year. Including

income, the total return from this investment is £9.9

million over a near eight year holding period, producing

an internal rate of return of 23 per cent and a multiple of

4.1x cost. There is the prospect of further consideration

based on performance targets; however, no value has

been recognised relating to these potential payments at

this time.

The sale of Intelligent Office generated proceeds of

£6.1 million, representing a capital profit over cost of

£3.2 million and an uplift of 21.1 per cent, or £1.1

million, on the carrying value at the beginning of the

year. Including income, the total return from this

investment was £7.6 million over an eight and a half

year holding period, producing an internal rate of return

of 14 per cent and a multiple of 2.6x cost.

In December 2022, the Company completed the partial

exit of its investment in leading planning and forecasting

software and services business, Vuealta, through the

sale of its fast-growing software division to long-standing

partner, Anaplan. The sale generated proceeds of

£4.6 million, 1.5x cost, and an uplift of 45.5 per cent or

£1.4 million on the carrying value at the beginning of the

year (including further investments made in the financial

year prior to sale). The Company remains invested in

the core Vuealta consulting business to support its next

phase of growth.

The Company realised its investment in Wakefield

Acoustics in January 2023, generating proceeds of

£1.0 million and an overall return of 1.5x cost. This was

a pleasing result, given the investment was valued at

£nil at the beginning of the financial year, emphasising

the Company’s commitment to portfolio companies at

all stages through their growth journey.

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

6

British Smaller Companies VCT plc Annual Report & Accounts

In addition, two investments, Arraco and Seven, which

had previously been fully provided for, were unable to

recover any value and were subsequently realised

during the year.

New Investments

The Company invested £28.4 million in the year into the

portfolio. Seven new investments were made in the year,

totalling £14.5 million. In our continued support of the

portfolio, nine companies received follow-on funding in

the year, totalling £13.9 million in aggregate.

The new investments are:

Investment

Sector

AutomatePro

SaaS platform providing test-automation tools for ServiceNow

Biorelate

Medical data curation

DrDoctor

Patient engagement and communications software platform

Plandek

DevOps analytics platform

Quality Clouds

Quality control technology for low code software solutions

Summize

Contract lifecycle management software

Xapien

Automated background research software

Financial Results

The movement in net asset value (“NAV”) per ordinary share and the dividends paid in the year are set out in the

table below:

Pence per

ordinary share

£000

159,534

NAV at 31 March 2022

Increase in value

Gain on disposal of investments

8,152

5,213

13,365

(1,003)

Net underlying change in investment portfolio

Net operating costs

Incentive fee

(125)

12,237

1,145

172,916

(15,884)

Total Return in period

Issue/buy-back of new shares

NAV before the payment of dividends

Dividends paid

NAV at 31 March 2023

157,032

Cumulative dividends paid

85.7

4.3

2.8

7.1

(0.5)

(0.1)

6.5

-92.2

(8.5)

83.7

174.9

Total Return: at 31 March 2023 258.6

at 31 March 2022 252.1

The charts on page 11 show the movement in Total Return and Net Asset Value over time in greater detail.

Chairman’s

Statement

(continued)

British Smaller Companies VCT plc Annual Report & Accounts

7

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

Liquidity and Fundraising

At 31 March 2023, the Company’s cash and money

market reserves of £28.3 million represented 18.0 per

cent of net assets; this excludes net proceeds of £44.3

million from the Company’s 2022/23 fundraise, for which

the associated shares were allotted in April 2023, as

noted on page 8.

Share Premium Cancellation

Following shareholder approval at the Annual General

Meeting in October 2022, the Company cancelled the

balance of its Share Premium, £63.6 million. This was

transferred to the Company’s Capital Reserve, and

provides greater flexibility to continue to pay regular

dividends to shareholders and facilitates the continued

periodic offer to buy back shares from shareholders.

As set out on page 63, this will become available for

distribution at various times over financial periods to

1 April 2026.

Board Changes

Purvi Sapre joined the Board on 6 June 2022. Purvi has

over 15 years investment experience in the UK and

international markets investing on behalf of debt, equity

and investment funds.

As noted above, Helen Sinclair retired as Chairman and

a director of the Board at the Company’s AGM on 16

September 2022.

Shareholder Relations

The 2022/23 shareholder workshop was well attended.

Attendees heard from economist and author Paul

Collier; Ben Hookway, CEO of Relative Insight, one of

the Company’s recent investments; and Matthew

Scullion of Matillion.

We also hosted an event by video platform on 1

December 2022, which included presentations from

Karen Barrett, CEO of Unbiased, and Sarim Khan,

CEO of SharpCloud.

The next in-person shareholder workshop will be held

jointly with British Smaller Companies VCT2 plc on 20

June 2023 at 1 Great George Street, Westminster,

London SW1P 3AA.

The portfolio investments held at the beginning of the

financial year, amounting to £101.2 million, delivered a

return over the year of £14.2 million. The listed

investments held saw a value fall of £0.8 million.

The current portfolio’s net valuation increased by £8.9

million. Within this there were valuation gains of £15.8

million, offset by £6.9 million of downward movements.

As anticipated by the impact of the changes to VCT

regulations in 2015, the composition of the portfolio

continues to evolve towards younger, higher growth

companies which are reinvesting earnings for further

growth. This, along with the ongoing realisation of

earlier, more income-focused investments, results in the

reduction of the Company’s ongoing income. However,

helped by the receipt of an ordinary dividend of £0.7

million from Displayplan and the benefit of higher

interest rates on cash and money market balances held,

income in the year was £2.0 million, compared to £1.1

million in the previous financial year. The trend of lower

ongoing income from the portfolio is expected to

continue as the proportion of new investments continues

to grow, although this may be offset by higher interest

on cash and money market deposits, at least in the

short term.

Dividends

Dividends paid in the year totalled 8.5 pence per

ordinary share. These comprised interim dividends of

4.0 pence per ordinary share; and a special dividend of

4.5 pence per ordinary share following the realisations

of Springboard and Intelligent Office. Cumulative

dividends paid as at 31 March 2023 were 174.9 pence

per ordinary share.

An interim dividend for the year ending 31 March 2024

of 2.0 pence per ordinary share will be paid on 28 July

2023, to shareholders on the register at 30 June 2023.

Dividend Re-investment Scheme (“DRIS”)

The Company operates a DRIS, which gives

shareholders the opportunity to re-invest any cash

dividends received; it is open to all shareholders,

including those who invested under the recent offers.

The main advantages of the DRIS are:

1the dividends remain tax free; and

2any DRIS investment attracts income tax relief at

the rate of 30 per cent.

For the financial year ended 31 March 2023, £3.7 million

was re-invested by way of the DRIS, from overall

dividends paid of £15.9 million.

8

British Smaller Companies VCT plc Annual Report & Accounts

Chairman’s

Statement

(continued)

STRATEGIC REPORT

SHAREHOLDER RELATIONS

Annual General Meeting

14 September 2023

The Annual General Meeting of the Company

will be held at 9:30 am on 14 September 2023

at 8-10 Hill Street, London W1J 5NG.

Full details of the agenda for this meeting are

included in the Notice of the Annual General

Meeting on page 92.

The electronic communications policy continues to be a

success, with 83 per cent of shareholders now receiving

communications in this way. Documents such as the

annual report are published on the website

www.bscfunds.com rather than by post, saving on

printing costs, as well as being more environmentally

friendly.

The Company’s website, www.bscfunds.com, is

refreshed on a regular basis and provides a

comprehensive level of information in what I hope is a

user-friendly format.

Post Balance Sheet Events

On 4 April 2023 the Company allotted shares from its

fully subscribed 2022/23 share offer. £44.3 million was

raised by the Company, resulting in the allotment of

53,559,905 ordinary shares. This increased the number

of ordinary shares issued with voting rights to

241,239,184.

Following the year end, one follow-on investment of

£0.8 million has been completed into Relative Insight,

and the Company realised its investment in Ncam, in

line with the valuation at 31 March 2023, with initial

proceeds of £1.4 million being received.

Outlook

Inflation remains stubbornly high, and is therefore

continuing to pull up interest rates. It remains a

challenging economic environment, and valuation

multiples are therefore likely to remain somewhat

depressed in the near-term. I am pleased to see the

portfolio’s continued resilience and promising levels of

underlying growth rates, and believe that many portfolio

companies will be stronger for the experience of

weathering the economic conditions of the past 12

months.

My fellow board members and I are grateful for the

support for the Company shown by new and existing

shareholders in the recent fundraising. We look forward

to updating you on progress deploying the funds into

exciting and innovative areas of the UK economy across

the forthcoming year.

Rupert Cook

Chairman

16 June 2023

British Smaller Companies VCT plc Annual Report & Accounts

9

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

The Company’s objective is to

maximise Total Return and provide

investors with a long-term tax free

dividend yield whilst maintaining the

Company’s status as a venture capital

trust.

Investment Policy

The investment strategy of the Company is to invest in

UK businesses across a broad range of sectors that

blends a mix of businesses operating in established and

emerging industries that offer opportunities in the

application and development of innovation in their

products and services.

These investments will all meet the definition of a

Qualifying Investment and be primarily in unquoted UK

companies. It is anticipated that the majority of these

businesses will be re-investing their profits for growth

and the investments will comprise mainly equity

investments.

The Company seeks to build a broad portfolio of

investments in early stage companies focussed on

growth with the aim of spreading the maturity profiles

and maximising return as well as ensuring compliance

with the VCT guidelines.

Borrowing

The Company does not borrow and has no borrowing

facilities, choosing to fund investments from its own

resources.

Objectives and

Key Policies

Co-investment

British Smaller Companies VCT plc and British Smaller

Companies VCT2 plc (together “the VCTs”) typically

co-invest in investments, allocating such investments

60 per cent to the Company and 40 per cent to British

Smaller Companies VCT2 plc. However, the Board of

the Company has discretion as to whether or not to

take up its allocation; where British Smaller Companies

VCT2 plc does not take its allocation, the Board may

opt to increase the Company’s allocation in such

opportunities.

The VCTs may invest alongside co-investment funds

managed by YFM, the Manager of the VCTs. The VCTs

have first choice on the initial £4.5 million of all equity

investment opportunities meeting the VCT qualifying

criteria. Amounts above £4.5 million are allocated two

thirds to the VCTs and one third to YFM’s co-investment

funds.

Asset Mix

Cash which is pending investment in VCT-qualifying

securities is held in interest bearing instant access,

short-notice bank accounts, money market funds and

investment funds listed on a recognised stock exchange

(including FCA authorised and regulated UCITS funds).

Remuneration Policy

The Company’s policy on the remuneration of its

directors, all of whom are non-executive, can be found

on page 49.

Other Key Policies

Details of the Company’s policies on the payment of

dividends, the DRIS and the buy-back of shares are

given on page 1. In addition to these, details of the

Company’s anti-bribery and environmental and social

responsibilities policies can be found on page 35.

10

British Smaller Companies VCT plc Annual Report & Accounts

The Manager is responsible for the

sourcing and screening of investment

opportunities, carrying out suitable

due diligence investigations and

making submissions to the Board

regarding potential investments.

Post investment, the Manager works intensively with

the businesses and management teams in which the

Company is invested, monitoring progress, effecting

change and, where applicable, redefining strategies

with a view to maximising values through structured

exit processes.

The Board regularly monitors the performance of the

portfolio and the investment requirements set by the

relevant VCT legislation. Reports are received from the

Manager regarding the trading and financial position of

each investee company and senior members of the

Manager regularly attend the Company’s Board

meetings. Monitoring reports on compliance with VCT

regulations are also received at each Board meeting

so that the Board can monitor that the Venture Capital

Trust status of the Company is maintained and take

corrective action if appropriate. Monitoring reports

carrying out an independent review of this compliance

are received twice a year.

Processes and

Operations

STRATEGIC REPORT

The Board reviews the terms of YFM Private Equity

Limited’s appointment as Manager on a regular basis.

YFM Private Equity Limited has performed investment

advisory, management, administrative and secretarial

services for the Company since its inception on 28

February 1996. The principal terms of the agreement

under which these services are performed are set out

in note 3 to the financial statements.

In the opinion of the directors, the continuing

appointment of YFM Private Equity Limited as Manager

is in the interests of the shareholders as a whole, in view

of its experience in managing venture capital trusts and

in making, managing and exiting investments of the

nature falling within the Company’s investment policies.

Administration of the Listed Investment Funds

Quoted Portfolio

The Company holds a small portfolio of listed investment

funds, the purpose of which is to optimise returns from

liquid assets while preserving capital value. Reporting

to the Manager, this portfolio is managed by Brewin

Dolphin Limited on a discretionary basis. The Board

receives regular reports on the make-up and market

valuation of this portfolio.

British Smaller Companies VCT plc Annual Report & Accounts

11

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

Key Performance

Indicators

Total Return, calculated by reference to the

cumulative dividends paid plus net asset value

(excluding tax reliefs received by shareholders), is the

primary measure of performance in the VCT industry.

Total Return with Dividend Re-Investment Scheme

(as at 31 March)

Total Return (pps)

The chart illustrates the Total Return

(excluding tax reliefs received by

shareholders) for investors who

subscribed to the first fundraising in 1996

who have re-invested their dividends.

2014201520162017201820192020202120222023

412.9

443.3

290.9

249.0

260.9

270.6

216.1

225.7

278.0

336.9

201420152016201720182019

2020202120222023

90.798.7108.7130.7136.4147.4

100.0

98.8

102.0

74.3

82.3

79.6

153.4157.4166.4174.9

64.5

75.8

85.783.7

208.7

213.0

216.0

221.7

192.7

197.5

233.2

217.9

252.1

258.6

Total Return

(as at 31 March)

Total Return (pps)

NAV (pps)

Cumulative dividends (pps)

The chart shows how the Total Return

of your Company has developed over the

last ten years.

The evaluation of comparative success

of the Company’s Total Return is by way

of reference to the Share Price Total

Return for an index of generalist VCTs

that are members of the AIC (based on

figures provided by Morningstar). This is

the Company’s stated benchmark index.

A comparison and explanation of the

calculation of this return is shown in

the Directors’ Remuneration Report

on page 51.

12

British Smaller Companies VCT plc Annual Report & Accounts

STRATEGIC REPORT

Shareholder Returns

The Board considers Total Return to be the primary measure of shareholder value. The IRR returns from the offers over

the last ten years are set out below. IRR is the annual rate of return that equates the cost at the date of the original

investment, with the value of subsequent dividends plus the audited 31 March 2023 Net Asset Value per share. This

excludes the benefit of any initial tax relief.

The IRRs shown are based on fundraisings and offer prices during the relevant calendar year whilst the second graph

below shows specific financial periods to 31 March 2023.

Set out below is the annualised return over 10, 5, 3, 2 and 1 years to 31 March 2023. The annualised return is

calculated with reference to the cumulative dividends paid in the period plus the audited NAV at 31 March 2023,

compared to the NAV at the beginning of the relevant period.

Excluding all tax reliefs

10 yrs5 yrs3 yrs2 yrs1 yr

11.0%

Annualised return p.a. over 10, 5, 3, 2 and

1 year periods

19.8%

(to 31 March 2023)

17.2%

9.0%

7.9%

Shareholder Returns Excluding

all Tax Reliefs

(to 31 March 2023)

20132014201520162017201920212022

9.2%

8.7%

9.0%

8.9%

7.8%

11.4%

18.4%

6.0%

Excluding all tax reliefs

Key Performance

Indicators

(continued)

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

British Smaller Companies VCT plc Annual Report & Accounts

13

Expenses

Ongoing Charges

The Ongoing Charges figure, as calculated in line with

the AIC recommended methodology, is used by the

Board to monitor expenses. This figure shows

shareholders the costs of the Company’s recurring

operational expenses, expressed as a percentage of

the average net asset value. Whilst based on historical

information, this provides an indication of the likely level

of costs that will be incurred in managing the Company

in the future.

Year to

31 March

2023

(%)

Year to

31 March

2022

(%)

Ongoing Charges figure*2.122.02

* Alternative Performance Measure

The level of ongoing charges has averaged 2.08 per

cent over the last 3 years. Shareholders benefit from the

Company’s agreement with the Manager to pay a lower

level of management fee of 1 per cent on surplus cash.

The Company’s ongoing charges ratio is one of the

lowest in the VCT industry.

Expenses Cap

The total costs incurred by the Company in the year

(excluding any performance related fees, trail

commission payable to financial intermediaries and

VAT) is capped at 2.9 per cent of the total net asset

value as at the relevant year end. The treatment of costs

in excess of the cap is described in note 3 on page 71.

There was no breach of the expenses cap in the current

or prior year.

Compliance with VCT Legislative Tests

A principal risk facing the Company is the retention

of its VCT qualifying status. The Board receives regular

reports on compliance with the VCT legislative tests

from the Manager. In addition, the Board receives

formal reports from its VCT Tax Adviser (Philip Hare &

Associates LLP) twice a year. The Board can confirm

that during the period, all of the VCT legislative tests

have been met.

Under Chapter 3 Part 6 of the Income Tax Act 2007, in

addition to the requirement for a VCT’s ordinary share

capital to be listed in the Official List on a European

regulated market throughout the period, there are further

specific tests that VCTs must meet following the initial

three year provisional period.

Income Test

The Company’s income in the period must be derived

wholly or mainly (70 per cent) from shares or securities.

Retained Income Test

The Company must not retain more than 15 per cent of

its income from shares and securities.

Qualifying Investments Test

At least 80 per cent by value of the Company’s

investments must be represented throughout the period

by shares or securities comprised in Qualifying

Investments of investee companies.

For shares issued in accounting periods beginning

on or after 6 April 2018, at least 30 per cent of those

share issues must be invested in Qualifying Investments

of investee companies by the anniversary of the

accounting period in which those shares are issued.

Eligible Shares Test

At least 70 per cent of the Company’s Qualifying

Investments must be represented throughout the period

by holdings of non-preferential shares.

Investments made before 6 April 2018 from funds raised

before 6 April 2011 are excluded from this requirement.

At least 10 per cent of the Company’s total investment in

each Qualifying Investment must be in eligible shares.

In addition, monies are not permitted to be used to

finance buy-outs or otherwise to acquire existing

businesses or shares.

Investment Limits

There is an annual limit for each investee company

which provides that they may not raise more than £5

million of state aided investment (including from VCTs)

in the 12 months ending on the date of each investment

(£10 million for Knowledge Intensive Companies).

There is also a lifetime limit that a business may not

raise more than £12 million of state aided investment

(including from VCTs); the limit for Knowledge Intensive

Companies is £20 million.

14

British Smaller Companies VCT plc Annual Report & Accounts

STRATEGIC REPORT

Maximum Single Investment Test

The value of any one investment must not, at any time

in the period, represent more than 15 per cent of the

Company’s total investment value. This is calculated

at the time of investment and updated should there be

further additions; as such, it cannot be breached

passively.

The Board can confirm that during the period, all of

the VCT legislative tests set out above have been met,

where required.

Further restrictions placed on VCTs are:

Dividends from Cancelled Share Premium

The Finance Act 2014 introduced a restriction with

respect to the use of monies in respect of VCTs. In

particular, no dividends can be paid out of cancelled

share premium arising from shares allotted on or after

6 April 2014 until at least three full financial years have

elapsed from the date of allotment.

Following shareholder approval at the 2022 Annual

General Meeting, in October 2022 the Company

cancelled the balance of its Share Premium, £63.6

million, of which £22.8 million is now distributable. The

remaining £40.8 million will become distributable over

the period to 1 April 2026, as set out on page 63.

Other

No more than seven years can have elapsed since the

first commercial sale achieved by the business (ten

years in the case of a Knowledge Intensive Company),

unless:

a. The business has previously received an

investment from a source that has received state

aid; or

b. The investment comprises more than 50 per cent of

the average of the previous five years’ turnover and

the funds are to be used in the business to fund

growth into new product markets and/or new

geographies.

Wherever possible, the Company self-assures that an

investment is a Qualifying Investment, subject to the

receipt of professional advice.

Key Performance

Indicators

(continued)

British Smaller Companies VCT plc Annual Report & Accounts

15

Portfolio Structure

and Analysis

Value above cost

At cost

Value below cost

Ordinary shares

Less than 1 year

Between 1 and 3 years

Between 3 and 5 years

Greater than 5 years

2023

19

27

40

Diversity

14

5

2022

33

6

56

20232022

L

P

L

P

2023 - 7%

2022 - 12%

88

93

L

Loan

P

Preference shares

AGE OF

INVESTMENTS (%)

INVESTMENT

INSTRUMENT (%)

20232022

84

87

VALUE COMPARED

910

TO COST (%)

7

3

Portfolio Structure

The broad range of the portfolio is illustrated

below, with 40 per cent of the portfolio

valuation being held for more than five

years, whilst 91 per cent is held at cost or

above. 7 per cent of the portfolio value is

held in loans and preference shares, and

loans now account for only 3 per cent

of the value.

Strategic Report

16

British Smaller Companies VCT plc Annual Report & Accounts

STRATEGIC REPORT

Portfolio Analysis

Also included below is a profile of

the portfolio by industry sector and the

breakdown of the portfolio between

investments made before and after

the VCT rule changes in 2015.

Investments made prior to rule change in 2015

Investments made following rule change in 2015

86

20232022

VCT RULES (%)

14

23

77

Application Software

Tech-enabled Services

Cloud & DevOps

Retail & Brands

Business Services

Other

VCT

rules

post

2015

21

VCT

rules

pre

2015

83

INDUSTRY SECTOR (%)

5

1

5

11

Data

10

28

New Media

17

Advanced Manufacturing

18

Portfolio Structure

and Analysis

(continued)

Investment

Review

The movements in the investment portfolio are set out in Table A below:

£123.4 million

Fair value of the

portfolio

(2022: £101.2 million)

27

Number of portfolio

companies with a

value of more than

£1.0 million

(2022: 23)

£1.4 million

Income from the

portfolio

(2022: £0.9 million)

£28.4 million

Level of investment

(2022: £9.8 million)

£14.2 million

Return from the

portfolio

(2022: £30.5 million)

The Portfolio

The portfolio showed robust performance in the period, adding £14.2 million of value on the opening fair value of

£101.2 million. The composition of investments continues to show its dynamism, with £28.4 million invested in the

period and cash proceeds of £20.4 million received.

Table A

Investment Portfolio

Portfolio

£million

Listed

Investment

Funds

£million

Total

£million

Opening fair value at 1 April 2022

101.2

4.6

105.8

Additions

28.4

0.5

28.9

Disposal proceeds

(20.4)

(0.3)

(20.7)

Valuation movement

14.2

(0.8)

13.4

Closing fair value at 31 March 2023

123.4

4.0

127.4

At 31 March 2023 the portfolio was valued at £123.4 million, representing 78.6 per cent of net assets (63.4 per cent

at 31 March 2022). The listed investment funds were valued at £4.0 million, representing 2.6 per cent of net assets

(2.9 per cent at 31 March 2022). Cash, cash equivalents and current asset investments at 31 March 2023 of

£28.3 million represented 18.0 per cent of net assets (33.5 per cent at 31 March 2022).

Fair value changes

Table B

Gain from Investment Portfolio

£million%

Gain in fair value from the portfolio

8.963

Gain on disposal over opening value from the portfolio

5.337

Gain arising from the portfolio

14.2100

Fall in value of listed investment funds

(0.8)

Gain arising from the investment portfolio

13.4

Of the £14.2 million gain in the year, £5.3 million arose from investments which were realised, including Springboard

(£2.0 million), Vuealta (partial realisation £1.4 million), Intelligent Office (£1.1 million) and Wakefield Acoustics (£1.0

million). Further details can be found in the Chairman’s Statement and note 7 to the financial statements.

British Smaller Companies VCT plc Annual Report & Accounts

17

S

t

r

a

t

e

g

i

c

Re

por

t

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

18

British Smaller Companies VCT plc Annual Report & Accounts

STRATEGIC REPORT

The ongoing portfolio delivered a net value gain of £8.9 million in the year. It is pleasing to see the fair value increases

arising across a range of companies, including tech-focused businesses such as Vuealta, Outpost, Unbiased and

Wooshii, as well as legacy companies such as Displayplan and ACC.

Some decreases in value have been seen. The Company’s largest investment, Matillion, saw its valuation decrease,

driven by lower valuation multiples of comparable public companies; although the effect of this has been partly offset by

the company’s continued strong revenue growth and movements in exchange rates over the year. Certain other

investments have struggled somewhat over the past 12 months, but the Manager continues to work closely with these

companies’ management teams to navigate their current challenges.

Other Significant Investment Movements

Investments

During the year ended 31 March 2023, the Company invested £28.4 million across 16 companies.

Seven new companies were added to the portfolio, receiving aggregate investment of £14.5 million; while a further

£13.9 million was invested across nine existing portfolio companies, including an additional investment into Quality

Clouds. The analysis of these investments is shown in Table C. The case studies on page 23 give more information

on the investments in AutomatePro and Quality Clouds.

Table C

Investments

Company

New

£million

Investments made

Follow-on

£million

Total

£million

Quality Clouds

1.5

2.4

3.9

DrDoctor

3.6

-

3.6

Outpost

-

3.0

Unbiased

-

2.7

AutomatePro

2.2

-

2.2

Plandek

2.1

-

2.1

Summize

1.8

-

1.8

Vypr

-

1.8

Xapien

1.7

-

1.7

Biorelate

1.6

-

1.6

Elucidat

-

1.3

Wooshii

-

1.0

Vuealta

-

0.9

Force24

-

0.7

Other

-

0.1

Portfolio (including capitalised income)

14.5

13.9

28.4

Listed investment funds

0.5

Total additions in the year

28.9

Investment

Review

(continued)

British Smaller Companies VCT plc Annual Report & Accounts

19

S

t

r

a

t

e

g

i

c

Re

por

t

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

Disposal of Investments

As set out in Table D below, during the year to 31 March 2023 the Company received proceeds from portfolio

disposals of £20.4 million, a net gain of £5.3 million over the opening carrying value at the beginning of the year, and

an overall net gain of £6.2 million over cost. This included the successful realisations of Springboard, Intelligent Office,

Vuealta (partial) and Wakefield Acoustics. Further details are given in the Chairman’s statement on page 5.

Table D

Disposal of Investments

Net

proceeds

from sale of

investments

£million

Opening

value

31 March

2022*

£million

Gain/(loss)

on opening

value

£million

Portfolio

20.4

15.1

5.3

Listed investment funds

0.3

0.4

(0.1)

Total investment disposals

20.7

15.5

5.2

* Including further investments during the year prior to realisation.

Further analysis of all investments sold in the year

can be found in note 7 to the financial statements on

page 79.

Investment Portfolio Composition

As at 31 March 2023, the portfolio was valued at

£123.4 million, comprising wholly of unquoted

investments. An analysis of the movements in the

year is shown on page 76.

The portfolio has 27 investments valued above

£1.0 million, four more than a year earlier, with the

single largest investment, Matillion, representing

16.0 per cent of the NAV.

The charts on pages 15 and 16 show the diversity of

the portfolio, split by industry sector, age of investment,

investment instrument and the valuation compared

to cost.

Under VCT legislation, it is not possible to deposit funds

for longer than seven days, which means that cash

deposits must be available on very short notice. The

Board and the Manager continually review opportunities

to generate a higher level of income, without significantly

changing the risk profile of the funds held. As part of this,

the Company holds a small diversified quoted portfolio

of listed investment funds, managed by Brewin Dolphin

Limited. At 31 March 2023, this quoted portfolio was

valued at £4.0 million, or 2.6 per cent of net assets,

following a decrease in value of £0.8 million during

the year.

Valuation Policy

Unquoted investments are valued in accordance

with both IFRS 13 ‘Fair Value Measurement’ and

International Private Equity and Venture Capital

Guidelines, December 2022 edition (IPEV Guidelines).

Initially, at the first quarter-end following investment,

investments are valued at the price of the funding round;

following this, the valuation switches to a new primary

basis for all subsequent periods.

The valuation methodology applied depends upon the

facts and circumstances of each individual investment.

This may be with reference to revenue multiples,

earnings multiples, net assets, discounted cash flows or

calibrated from the price of the most recent investment.

The full valuation policy is set out in note 1 on pages 66

and 67.

Table E on page 20 shows the value of investments

within each valuation category as at 31 March 2023; no

investments are currently valued using discounted cash

flow methodologies.

With continued investment in earlier stage businesses

that are investing for growth, the majority of valuations

continue to be based on revenue multiples.

20

British Smaller Companies VCT plc Annual Report & Accounts

Investment

Review

(continued)

STRATEGIC REPORT

Table E

Valuation Policy

Valuation

£million

2023

% of

portfolio

by value

2022

% of

portfolio

by value

Revenue multiple

97.0

79

72

Earnings multiple

15.8

13

21

Cost or price of recent investment, reviewed for change in fair value

5.5

4

3

Sale proceeds

3.1

2

-

Net assets, reviewed for change in fair value

2.0

2

Discounted cashflow

-

2

Total

123.4

100

Sustainable Investment and Environmental, Social

and Governance (“ESG”) Management

The Company backs small UK businesses to help them

to grow and produce strong financial returns for

shareholders with the additional aim of building better

businesses that are ultimately more sustainable.

In order to deliver more sustainable businesses,

and to meet its commitments under the Principles for

Responsible Investment (PRI), the Manager has

continued to develop its processes in this area.

The Manager’s approach is based on the belief that

good businesses:

Grow our economyImprove our society

Value their peopleProtect the environment

British Smaller Companies VCT plc Annual Report & Accounts

21

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

These aims are consistent with the Company’s financial

aims because businesses which improve in these areas

also strengthen their resilience and value creation

potential through their increased attractiveness to

customers, employees, suppliers and eventual future

owners and investors.

Sustainable Investment Principles

This set of principles guides the Manager’s investment

process:

>To seek to understand the ESG related impacts on

portfolio companies, aiming to grow and enhance

positive outcomes and to avoid, reduce or minimise

any negative impacts over an investment’s lifetime,

leaving them overall better businesses;

>To play a positive role in the investor, business and

wider communities by promoting good practice in

ESG management, and by being transparent in the

way that investments are made and how the

Manager behaves;

>To increase focus on the challenge of climate

change both as it may be affected by our

investments, and as it may impact on them and

their resilience to possible climate change

scenarios;

>To show leadership by managing the Manager’s

own business’ ESG impacts to the best of their

ability; and

>To be a proactive signatory to the PRI and to

integrate its principles into the Manager’s business

practices.

In line with the PRI the Manager has developed

processes to help the portfolio businesses to be better in

each of these spheres, by assessing them in terms of

creating positive impacts and outcomes and preventing

or minimising negative ones.

The Manager has more recently developed and

integrated its ESG management processes, which are:

>Pre-investment Phase:

Structured processes at the pre-investment stage to

identify areas of potential ESG improvement as part

of the due diligence and pre-investment

deliberations. Appropriate data is collected and

assessed on each business against ESG criteria at

the point of investment as a benchmark against

which to evaluate future progress.

>Portfolio Phase:

For those investments made since 2020, based on

the data collected at the point of investment at the

start of the portfolio phase, bespoke areas for

improvement are agreed with each management

team together with consequent objectives and

targets. A similar process has been applied to the

significant majority of investments made prior to

2020. Improvements are then measured and

recorded against a set of ESG criteria using the

Manager’s bespoke ESG framework, refreshing

targets annually and placing focus on any new

issues as they become more material in the

management of the company and in meeting the

expectations of its stakeholders.

>Reporting:

Annual reports will be produced, using the

Manager’s ESG framework for consistency,

recording the relevant initiatives, impacts and ESG

KPI performance of each company and providing

an overview of progress across the Manager’s

portfolios.

Note that Investment Companies are not within

scope for reporting under the Task Force on

Climate-Related Financial Disclosures (TCFD); and

the Company does not use more than 40,000kWh

of energy and therefore is not required to report on

its energy usage within Streamlined Energy and

Carbon Reporting regulations.

ESG Performance Data and Reporting

ESG KPI data analysis

The Manager has developed its ESG KPI data collation

process. It has established a data set reflecting the

above ESG themes and a means of collecting this to

make year on year comparisons for each company and

across the portfolio. Where possible baseline data has

been collected from the date of investment with a view to

showing where the Manager’s support has made a

difference during the hold period to the reporting date.

Annual company specific ESG performance progress

report

The reviews that the Manager has been conducting

enabled the identification of relative strengths and

weaknesses and agreement of programmes of action

with each business.

22

British Smaller Companies VCT plc Annual Report & Accounts

Investment

Review

(continued)

STRATEGIC REPORT

Since 2021 the Manager has moved to recording annual

updates and agreed actions in a more visual and

detailed report on both qualitative and quantitative

aspects of each company’s progress. As well as using

this for portfolio reporting to investors it will be used as

an engagement tool with the senior management teams

of each company.

2022 ESG KPI Report for Investments held in

YFM’s VCT funds

>£44.7 million of R&D investment during 2022

>£51.6 million of export sales achieved in 2022

>95 per cent of companies were independently

chaired in 2022

>40 per cent of companies had female directors on

boards, with 20 per cent having a female CEO

>40 per cent of businesses had a designated

board member with responsibility for improving

ESG issues

>35 per cent of the portfolio workforce was female

in 2022

>995 new jobs were created from date of investment

to 2022

>75 per cent had mental wellbeing programmes in

place and 70 per cent held regular employee

engagement surveys

>Approaching 29,000 hours of training was given

to employees

>60 per cent of companies had active carbon

reduction strategies (up from 10 per cent at

investment)

>25 per cent offset all or a defined portion of their

carbon impact

>But only 20 per cent formally measure their

carbon footprint

Summary and Outlook

The portfolio continues to show its resilience, with strong

underlying levels of revenue growth across the largest

investments, helping to counter downward pressure on

revenue multiples. Portfolio company management

teams continue to be resilient and adaptable to

economic conditions, which will hold them in good stead

for future progress.

We continue to see a strong pipeline of potential

investments in a range of growth companies, as well

as opportunities to further support the continued growth

of the current portfolio. We thank investors for their

continuing support in the Company’s recent fundraising,

and are looking forward to putting the funds raised

to work.

16 June 2023

Growing

our economy

Improving

our society

Valuing our

people

Protecting

our environment

Eamon Nolan

YFM Private Equity Limited

British Smaller Companies VCT plc Annual Report & Accounts

23

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

Case Studies

AMOUNT INVESTED

£2.2 million

THE BUSINESS AT INVESTMENT

A cloud based intelligent test automation and DevOps

software provider

THE INVESTMENT

Growth capital to fund US expansion, tech innovation

and customer success capabilities

RATIONALE FOR THE DEAL

To scale up AutomatePro’s sales, marketing and

customer success functions and to develop innovative

new product modules. The investment will also help

the business continue expansion into the US, filling the

demand from the existing and growing ServiceNow

ecosystem

AMOUNT INVESTED

£3.9 million

THE BUSINESS AT INVESTMENT

A leading SaaS tool for the control and governance of

critical SaaS platforms, with a focus on ServiceNow

and Salesforce

THE INVESTMENT

Growth capital to enable further growth and overseas

expansion

RATIONALE FOR THE DEAL

The investment backs the experienced founders and

management team to strengthen the company’s

offering globally, and increase Quality Cloud’s ability

to unlock the value of their customer’s growing

ServiceNow and Salesforce deployments. The

investment follows strong growth in the US, where 45

per cent of Quality Clouds’ clients are based

SINCE INVESTMENT

Quality Clouds continues to grow its customer base in

Europe and the US, adding logos such as Shell and JP

Morgan Chase, and has bolstered the senior team with

an experienced CRO and VP Customer Success. The

Company participated in a further capital raise in

March 2023, providing £2.4 million of additional

funding to enable the Company to expand the GTM

team and execute on a growing pipeline

24

British Smaller Companies VCT plc Annual Report & Accounts

STRATEGIC REPORT

PageName of

Nocompany

Date of

initial

investmentLocation

Industry

Sector

Amount

invested

£000

Recognised

Valuation at income/ Realised &

31 March proceeds unrealised

2023 to date value to date*

£000£000£000

27Matillion LimitedNov-16ManchesterData2,66625,1937,07132,264

27Unbiased EC1 LimitedDec-19LondonTech-enabled Services 5,5969,976-9,976

28Outpost VFX Limited

Feb-21Bournemouth

New Media4,500

9,420239,443

28Displayplan Holdings Limited

Jan-12Stevenage

Business Services1,300

7,9013,16811,069

28Wooshii Limited

May-19London

New Media4,644

7,1414997,640

29Elucidat Ltd

May-19Brighton

Application Software3,960

6,277666,343

29ACC Aviation Group Limited

Nov-14Reigate

Business Services2,068

5,3985,28010,678

29Force24 Ltd

Nov-20Leeds

Application Software3,150

4,757-4,757

30Quality Clouds Limited

May-22London

Cloud & DevOps3,916

4,074-4,074

30Vypr ValidationJan-21ManchesterTech-enabled Services 3,3004,051-4,051

Technologies Limited

DrDoctor (via ICNH Ltd)

Feb-23London

Application Software3,5653,565-3,565

SharpCloud Software Limited

Oct-19London

Data3,4073,404-3,404

Relative Insight LimitedMar-22LancasterTech-enabled Services 3,0002,794-2,794

Tonkotsu Limited

Jun-19London

Retail & Brands

2,3882,666-2,666

AutomatePro Limited

Dec-22London

Cloud & DevOps

2,2252,557-2,557

Vuealta Holdings LimitedSep-21LondonTech-enabled Services 3,0452,1264,6016,727

Plandek LimitedOct-22

London

Cloud & DevOps2,0702,070

-2,070

Traveltek Group Holdings Limited Oct-16

East Kilbride

Application Software1,7162,049

8272,876

Frescobol Carioca LtdMar-19

London

Retail & Brands1,8001,995

-1,995

Summize LimitedOct-22

Manchester

Application Software1,8001,885

-1,885

KeTech Enterprises LimitedNov-15NottinghamTech-enabled Services 2,0001,7862,5994,385

Mar-23London

Application Software1,7401,740

-1,740

Xapien (via Digital Insight

Technologies Ltd)

Ncam Technologies Limited

Mar-18London

New Media2,6431,659

1311,790

Biorelate Limited

Nov-22Manchester

Application Software1,5601,570

-1,570

Nov-19Leeds

Data1,5001,500

-1,500

Panintelligence

(via Paninsight Limited)

Jun-16Hampshire

Cloud & DevOps2,6541,464

11,465

Sipsynergy (via Hosted

Network Services Limited)

E2E Engineering Limited

Business Services9001,200

2231,423

Sep-17Welwyn

Garden City

Other investments below £0.75 million

12,413

3,143

7,797

10,940

Total unquoted investments

85,526

123,361

32,286

155,647

Full disposals to date

74,032

-

147,832

Total portfolio

159,558

123,361

180,118

303,479

* represents recognised income and proceeds received to date plus the unrealised valuation at 31 March 2023.

Portfolio Summary

at 31 March 2023

British Smaller Companies VCT plc Annual Report & Accounts

25

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

Name of Company

Investment

valuation at

31 March

2022

£000

Disposal

proceeds

£000

Additions

including

capitalised

income

£000

Valuation

gains

including

profits (losses)

on disposal

£000

Investment

valuation

at 31 March

2023

£000

Vuealta Holdings Limited/Vuealta Group Limited

2,308

(4,601)

946

3,473

2,126

Outpost VFX Limited

3,310

-

3,000

3,110

9,420

Unbiased EC1 Limited

6,230

-

2,650

1,096

9,976

Wooshii Limited

5,098

-

984

1,059

7,141

Traveltek Group Holdings Limited

1,549

-

500

2,049

Elucidat Ltd

4,634

-

1,260

383

6,277

Panintelligence (via Paninsight Limited)

1,125

-

375

1,500

AutomatePro Limited

-

2,225

332

2,557

Frescobol Carioca Ltd

1,811

-

184

1,995

Tonkotsu Limited

2,496

-

170

2,666

Quality Clouds Limited

-

3,916

158

4,074

E2E Engineering Limited

1,078

-

122

1,200

Vypr Validation Technologies Limited

2,148

-

1,800

103

4,051

Summize Limited

-

1,800

85

1,885

Force24 Ltd

3,997

-

750

10

4,757

Biorelate Limited

-

1,560

10

1,570

DrDoctor (via ICNH Ltd)

-

3,565

-

3,565

Plandek Limited

-

2,070

-

2,070

Xapien (via Digital Insight Technologies Ltd)

-

1,740

-

1,740

Relative Insight Limited

3,000

-

(206)

2,794

Ncam Technologies Limited

2,213

-

(554)

1,659

Other investments £0.75 million and below

620

-

120

(623)

117

Sipsynergy (via Hosted Network Services Limited)

2,096

-

(632)

1,464

SharpCloud Software Limited

4,298

-

(894)

3,404

Arcus Global Limited

1,365

-

(1,126)

239

Matillion Limited

28,053

-

(2,860)

25,193

Investments made after November 2015

77,429

(4,601)

28,386

4,275

105,489

Displayplan Holdings Limited

4,393

-

3,508

7,901

Springboard Research Holdings Limited

6,638

(8,673)

-

2,035

-

ACC Aviation Group Limited

3,641

-

1,757

5,398

Intelligent Office UK (IO Outsourcing Limited t/a Intelligent Office)

5,051

(6,119)

-

1,068

-

Wakefield Acoustics (via Malvar Engineering)

-

(972)

-

972

-

Other investments £0.75 million and below

2,081

-

706

2,787

KeTech Enterprises Limited

1,926

-

(140)

1,786

Investments made prior to November 2015

23,730

(15,764)

-

9,906

17,872

Total portfolio

101,159

(20,365)

28,386

14,181

123,361

since 31 March 2022

Summary of

Portfolio Movement

26

British Smaller Companies VCT plc Annual Report & Accounts

STRATEGIC REPORT

Investee Company

Information

Data

Fair Value

£30.1m

Number of companies

3

Tech-enabled Services

Fair Value

£20.7m

Number of companies

5

Application Software

Fair Value

£22.8m

Number of companies

9

New Media

Fair Value

£18.6m

Number of companies

4

Business Services

Fair Value

£15.1m

Number of companies

5

Cloud & DevOps

Fair Value

£10.2m

Number of companies

4

Retail and Brands

Fair Value

£4.9m

Number of companies

2

Advanced Manufacturing

Fair Value

£0.2m

Number of companies

1

Other

Fair Value

£0.8m

Number of companies

5

British Smaller Companies VCT plc Annual Report & Accounts

27

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

Matillion is a leading provider of cloud-based data

extraction and transformation tools. The company

helps businesses interpret their data in the cloud

for insight and decision making and is headquartered

in Manchester with offices in Denver, Seattle and

New York.

www.matillion.com

Cost:

Valuation:

Date of initial investment:

Equity held:

Valuation basis:

£1,778,000

£25,193,000

November 2016

3.1%

Revenue multiple

Year ended 31 December

2020

$million

2022*

$million

Revenue

LBITA

Loss before tax

Retained losses

Net assets

57.26

(31.34)

(31.60)

(68.30)

226.96

29.98

(11.57)

(11.89)

(36.88)

22.89

*13 months to 31 January 2022

Portfolio

Matillion Limited

Manchester

Unbiased is a technology-enabled marketplace that

connects consumers to Independent Financial Advisers,

Mortgage Brokers and Accountants. The company has a

strong, well-established position and brand awareness in

the IFA market with a high level of recurring subscription

income from the thousands of professionals in their

network. The proven UK model is now being launched

into the much larger US financial advisor market.

www.unbiased.co.uk

Cost:

Valuation:

Date of initial investment:

Equity held:

Valuation basis:

£5,596,000

£9,976,000

December 2019

18.5%

Revenue multiple

Year ended 30 September

2021

£million

2022

£million

Revenue

EBITA (LBITA)

Loss before tax

Retained losses

Net assets

8.00

0.29

(0.32)

(2.19)

2.40

5.73

(0.58)

(1.09)

(1.90)

2.69

Unbiased EC1 Limited

London

The top 10 investments

had a combined value of

£84.2 million, 68.2 per cent

of the total portfolio.

28

British Smaller Companies VCT plc Annual Report & Accounts

STRATEGIC REPORT

Outpost is a visual effects firm best known for their

striking environments, seamless digital makeup and

photoreal creatures. The company is headquartered

in Bournemouth, with studios in Montreal and London.

An impressive client list includes global streaming

platforms such as Netflix, Amazon and Apple, and

major Hollywood studios.

www.outpost-vfx.com

Cost:

Valuation:

Date of initial investment:

Equity held:

Valuation basis:

Interest:

£4,500,000

£9,420,000

February 2021

17.3%

Revenue multiple

£22,603 (2022 £nil)

Year ended 31 March

2021

£million

2022

£million

Revenue

LBITA

Loss before tax

Retained losses

Net assets

19.08

(0.02)

(0.41)

(4.03)

0.89

7.47

(1.16)

(1.75)

(3.72)

1.20

Outpost VFX Limited

Bournemouth

Wooshii is a global video production agency using

technology to manage a geographically distributed

network of creative professionals. The company offers

clients the convenience and quality of a traditional

video marketing agency combined with cutting edge

video management tools. It has an impressive client

list including Coca Cola, Google, Microsoft and

Amazon. Wooshii has also developed software tools

to enable its customers to extract greater value from

their historic libraries.

www.wooshiivideoagency.com

Wooshii Limited

London

Cost:

Valuation:

Date of initial investment:

Equity held:

Valuation basis:

Dividends:

£4,644,000

£7,141,000

May 2019

19.9%

Revenue multiple

£164,700 (2022 £151,755)

Year ended 31 March

2021

£million

2022

£million

Revenue

LBITA

Loss before tax

Retained losses

Net liabilities

4.30

(1.18)

(1.45)

(5.97)

(4.06)

2.63

(1.07)

(1.24)

(4.51)

(2.95)

Displayplan specialises in creating and delivering

permanent in-store “point of purchase” display

and fixtures. It provides a complete retail display

consultancy service from concept through to design,

sourcing and final installation. Clients include M&S,

Sainsburys and Nike.

www.displayplan.com

Cost:

Valuation:

Date of initial investment:

Equity held:

Valuation basis:

Dividends:

£130,000

£7,901,000

January 2012

22.3%

Earnings multiple

£700,000 (2022 £136,500)

Year ended 31 December

2020

£million

2021

£million

Revenue

EBITA

Profit before tax

Retained profits

Net assets

23.6218.01

2.48 1.40

2.28 1.22

7.97 6.54

8.386.95

DisplayPlan Holdings Limited

Stevenage

British Smaller Companies VCT plc Annual Report & Accounts

29

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

Elucidat provides a cloud-based e-learning authoring

platform which allows its customers to drive down

the cost of producing business-critical training. The

company has impressive customer retention and

a client list including Tesco, Target and Walmart.

www.elucidat.com

Cost:

Valuation:

Date of initial investment:

Equity held:

Valuation basis:

Interest:

Dividends:

£3,960,000

£6,277,000

May 2019

15.1%

Revenue multiple

£21,699 (2022 £30,000)

£65,753 (2022 £nil)

Year ended 31 December

2020

£million

2021

£million

Revenue

LBITA

Loss before tax

Retained losses

Net assets

5.11

(0.06)

(0.77)

(1.72)

1.80

3.00

(0.49)

(0.92)

(1.12)

2.41

Elucidat Ltd

Brighton

Force24 provides cloud-based personalised marketing

automation technology trusted by over 350 businesses

including household brands such as Michelin, Tarmac

and Children In Need.

www.force24.co.uk

Cost:

Valuation:

Date of initial investment:

Equity held:

Valuation basis:

£3,150,000

£4,757,000

November 2020

20.0%

Revenue multiple

Year ended 31 December

2020

£million

2021

£million

Revenue

LBITA

Loss before tax

Retained losses

Net assets

4.55

(1.96)

(2.26)

(1.83)

1.97

3.48

(0.09)

(0.66)

(0.19)

3.61

Force24 Ltd

Leeds

ACC Aviation is the market leader in airline-to-airline

“wet lease” brokerage and associated services. The

company also provides a range of consultancy and

specialist charter services to clients via its global

office network.

www.accaviation.com

Cost:

Valuation:

Date of initial investment:

Equity held:

Valuation basis:

£220,000

£5,398,000

November 2014

27.6%

Earnings multiple

Year ended 31 December*

2021

£million

2022

£million

Revenue

EBITA

Loss before tax

Retained profits

Net assets

72.76

2.70

(0.72)

8.08

8.10

41.84

0.84

(2.23)

9.71

9.73

*information for NEWACC (2018) Limited shown

ACC Aviation Group Limited

Reigate

30

British Smaller Companies VCT plc Annual Report & Accounts

STRATEGIC REPORT

Quality Clouds provides a leading SaaS tool for the

control and governance of critical SaaS platforms,

with a focus on ServiceNow and Salesforce. The

Company operates from London, Barcelona and

the US, with a client list that includes BP, Linde

and JP Morgan Chase.

www.qualityclouds.com

Cost:

Valuation:

Date of initial investment:

Equity held:

Valuation basis:

£3,916,000

£4,074,000

May 2022

13.2%

Revenue multiple

Year ended 31 December

2020

£million

2021

£million

Revenue

LBITA

Loss before tax

Retained losses

Net assets

1.04

(1.50)

(1.61)

(4.14)

0.74

0.71

(1.52)

(1.54)

(2.65)

1.36

Quality Clouds Limited

London

Vypr is a cloud-based data validation platform

providing industry-leading consumer intelligence for

use in all aspects of product development including

packaging, pricing and naming.

www.vyprclients.com

Cost:

Valuation:

Date of initial investment:

Equity held:

Valuation basis:

£3,300,000

£4,051,000

January 2021

19.3%

Revenue multiple

Year ended 31 March

2021

£million

2022

£million

Revenue

LBITA

Loss before tax

Retained losses

Net assets

2.07

(1.20)

(1.49)

(1.48)

1.05

1.46

(0.03)

(0.27)

(0.16)

2.37

Vypr Validation Technologies Limited

Manchester

British Smaller Companies VCT plc Annual Report & Accounts

31

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

The Board carries out a regular

review of the risk environment in

which the Company operates. The

emerging and principal risks and

uncertainties identified by the Board

and techniques used to mitigate these

risks are set out in this section.

The Board seeks to mitigate its emerging and principal

risks by setting policy, regularly reviewing performance

and monitoring progress and compliance. In the

mitigation and management of these risks, the Board

rigorously applies the principles detailed in section 4 of

The UK Corporate Governance Code issued by the

Financial Reporting Council in July 2018: “Audit, Risk

and Internal Control”. Details of the Company’s internal

controls are contained in the Corporate Governance

Internal Control section on pages 47 and 48 and further

information on exposure to risks, including those

associated with financial instruments, can be found

in note 16a of the financial statements.

The Board has considered emerging risks. The Board

seeks to mitigate identified and emerging risks

by regular reviews of performance and monitoring

compliance with policy. The Board has identified the

following as potential emerging risks:

>Deterioration of macro-economic environment

>Geo-political instability

Risk

Factors

Risk

Mitigation

Change

VCT Qualifying Status:

The Company must at all times

ensure compliance with the

conditions for maintenance of

approved VCT status. The loss of

approval as a VCT could lead to its

investors losing the various tax

benefits associated with VCT

investments.

One of the Key Performance Indicators monitored

by the Company is the compliance with VCT

rules. Compliance with these rules is closely

monitored by the Manager on an ongoing basis

and regularly reported to and reviewed by the

Board. The Company also makes use of external

experts, who review the Company’s compliance

with VCT rules on a regular basis. Details of how

the Company manages these requirements can

be found under the heading “Compliance with

VCT Legislative Tests” on pages 13 and 14.

No change

Economic:

Events such as recession and

interest rate fluctuations, which

may include factors arising from

geopolitical shocks, could

adversely affect investee

companies’ performance and

valuations. This could result in a

reduction in the performance of the

Company.

As well as the response to the ‘Investment and

Strategic’ risk on page 32, the Company has a

clear investment policy (summarised on page 9)

and a diversified portfolio operating in a range of

sectors which helps to mitigate against sector

specific impacts. The Manager actively monitors

investee company performance, which provides

quality information for monthly reviews of the

portfolio.

Stable – the war in

Ukraine and the

inflationary environment

continue to mean that

this risk is slightly

increased, albeit at a

similar level to last year.

32

British Smaller Companies VCT plc Annual Report & Accounts

STRATEGIC REPORT

Risk

Mitigation

Change

Investment and Strategic:

Inappropriate strategy, poor asset

allocation or consistently weak

stock allocation may lead to

underperformance and poor

returns to shareholders. The quality

of enquiries, investments, investee

company management teams and

monitoring, and the risk of not

identifying investee company

difficulties may lead to

underperformance by the

Company and poor returns to

shareholders.

The Board reviews strategy annually. At each of

the Board meetings, the directors review the

appropriateness of the Company’s objectives and

stated strategy in response to changes in the

operating environment and peer group activity. It

also reviews compliance of the Manager with the

stated investment strategy.

The Manager carries out appropriate due

diligence on potential investee companies and

their management teams and utilises external

reports where appropriate to assess the viability of

investee businesses before investing. Wherever

possible, a nonexecutive director will be appointed

to the board of the investee company on behalf of

the Company.

No change

Regulatory:

The Company is required to

comply with the Companies Act

2006, the rules of the UK Listing

Authority, the Financial Conduct

Authority’s Prospectus Rules and

UK adopted international

accounting standards; it is also

subject to the AIFMD EU Exit

Regulations. Breach of any of

these might lead to suspension of

the Company’s Stock Exchange

listing, financial penalties or a

qualified audit report.

The Manager and the Company Secretary have

procedures in place to ensure recurring Listing

Rules requirements are met and actively consult

with brokers, solicitors and external compliance

advisers as appropriate.

The Manager ensures that it hires suitably

qualified members of staff who are experienced

with regulatory requirements and relevant

accounting standards.

The key controls around regulatory compliance

are explained on pages 47 and 48.

No change

Legislative:

A change to the VCT regulations

could result in a significant change

to investment strategy which could

adversely impact the Company.

Such changes may also result in

changes to VCT tax reliefs for

investors, which could make future

fundraising difficult.

The Manager is a member of the Venture Capital

Trust Association which engages with the

Government to help shape future legislation.

No change

Reputational:

Inadequate or failed controls might

result in breaches of regulations or

loss of shareholder trust.

The Board is comprised of directors with suitable

experience and qualifications who report annually

to the shareholders on their independence. The

Manager is well-respected, with a proven track

record. It has a formal recruitment process to

employ experienced investment staff.

Advice is sought from external advisors where

required.

No change

Risk

Factors

(continued)

British Smaller Companies VCT plc Annual Report & Accounts

33

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

Risk

Mitigation

Change

Operational:

The Company is reliant on a

number of third parties, in particular

the Manager, for investment

management and administration

services.

Failure of the operational systems

and Controls of these third parties

could result in an inability to

provide accurate reporting and

monitoring.

The Manager has a documented business

continuity plan, which provides for back-up

services in the event of a system breakdown. The

Manager’s systems are protected against viruses

and other cyber-attacks. The Manager regularly

tests its business continuity plan. Both the

Company and the Manager maintain appropriate

insurances.

No change

Cyber Security and Information

Technology:

A failure in IT systems and controls

might lead to business interruption,

loss of data, the inability of the

Manager to provide accurate

reporting and monitoring or the loss

of Company records.

The Manager has in place significant cybersecurity

controls, including two factor authentication, email

protection software, monitored firewalls and

regularly updated electronic devices. The Manager

is Cyber Essentials Plus certified. Staff at the

Manager regularly receive training in relation to

their cybersecurity obligations.

No change

ESG:

The Company, the Manager and

the portfolio companies may fail to

positively contribute towards, and

adapt to, the global transition

towards decarbonisation and other

ESG priorities, which could result in

regulatory breaches, reduced

investor and/or employee attraction

and the reduced ability of portfolio

companies to attract lending to

fund their growth.

The Manager is a signatory of the UN’s Principles

for Responsible Investment; it has published its

Sustainable Investment Principles; and has

rewritten its Ethical Policy. Its investment process

now includes a set of over 50 thematic ESG KPIs,

with which it is now tracking its portfolio over time

across four key areas:

Improve our Society; Protect our Environment;

Grow our Economy; and Value our People.

Further details can be found on pages 20 to 22.

No change

Liquidity:

a. The Company may not have

sufficient liquidity available to

meet its financial obligations.

b. The VCT invests into smaller

unquoted companies, which by

their nature are illiquid,

therefore they may be difficult to

realise, at fair market value, at

short notice.

The Company’s overall liquidity risks and cashflow

forecasts are monitored on an ongoing basis by the

Manager and on a quarterly basis by the Board.

The Company’s valuation methodology takes

account of potential liquidity restrictions in the

markets in which it invests.

For any publicly listed investments, accounting

standards require an ongoing assessment of the

liquidity of the stock.

The Manager regularly reviews its exit plans for

investee companies to allow it to identify the

optimal point at which to seek a sale. As part of a

planned exit, the assistance of a third party adviser

will normally be sought, with a view to identifying

the largest number of possible purchasers.

No change

34

British Smaller Companies VCT plc Annual Report & Accounts

STRATEGIC REPORT

Section 172 Statement

This Section 172 Statement should

be read in conjunction with the

Company Information

The Company is a member of the Association of

Investment Companies which promotes the interests

of investment companies, including VCTs. The Manager

is a founder member of the Venture Capital Trust

Association, which promotes the interests of VCTs

in a variety of ways.

Portfolio Companies

The Company holds minority investments in its portfolio

companies and has delegated the management of the

portfolio to the Manager. The Manager provides the

Board with regular updates on the performance of each

portfolio company at least quarterly and the Board is

made aware of all major issues.

The Manager has a dedicated Portfolio team to assist

the portfolio companies with the challenges that they

face as fast-growing companies. The Manager promotes

ongoing, sustainable growth within the businesses; this

often involves improving systems and processes, as well

as significant job creation.

Employees

The Company has no employees. The Board is

composed of one female non-executive director and

three male non-executive directors. For a review of the

policies used when appointing directors to the Board of

the Company, please refer to the Directors’

Remuneration Report.

Environment and Community

The Company seeks to ensure that its business is

conducted in a manner that is responsible to the

environment. The management and administration of the

Company is undertaken by the Manager, YFM Private

Equity Limited, who recognises the importance of its

environmental responsibilities and has signed up to the

United Nations’ Principles for Responsible Investment.

More details of the work that the Manager has done in

this area are set out on pages 20 to 22. Its Sustainable

Investment Policy can be found at www.yfmep.com/who-

we-are/our_impact/.

Business Conduct

The Company has a zero tolerance approach to bribery.

The following is a summary of its policy:

>It is the Company’s policy to conduct all of its

business in an honest and ethical manner. The

Company is committed to acting professionally,

fairly and with integrity in all its business dealings

and relationships;

>The directors of the Company, the Manager and

any other service providers must not promise, offer,

give, request, agree to receive or accept financial or

other advantage in return for favourable treatment,

to influence a business outcome or gain any

business advantage on behalf of the Company

or encourage others to do so;

>The Company has communicated its anti-bribery

policy to the Manager and its other service

providers and, in turn, the Manager ensures that

portfolio companies implement appropriate policies

of their own; and

>The Manager has its own Anti-Bribery and Anti-

Slavery policies and ensures that portfolio

companies adopt a similar policy.

The Strategic Report on pages 5 to 35 is approved

by order of the Board.

Rupert Cook

Chairman

16 June 2023

36

British Smaller Companies VCT plc Annual Report & Accounts

Rupert CookAdam BastinJonathan CartwrightPurvi Sapre

Rupert Cook Chairman

(appointed to the Board 1 August 2017, appointed Chair

on 16 September 2022) Chair of the Investment

Committee specialises in strategy and corporate

development, with 30 years’ experience of technology

companies, including 20 years in corporate finance and

investment. He has led multiple fundraisings,

acquisitions and sales of technology businesses as well

as having co-founded and built up his own consultancy

and training business through to sale to a UK plc. Earlier

in his career, he was a senior manager at Cap Gemini

plc, Director of Advisory Services at Interregnum plc and

Head of Technology M&A at goetzpartners corporate

finance. As well as being an active angel investor, both

in the UK and the US, Rupert is currently Chair of

Netacea Ltd and a non-executive director of Immersive

Labs Ltd and Censornet Ltd.

Adam Bastin

(appointed 11 September 2019) was most recently EVP,

Strategy & Corporate Development of TAAssociates-

backed Unit4, an ERP software vendor, where he

was responsible for strategic direction as well as the

acquisition and integration of complementary

businesses. Prior to Unit4, Adam spent eight years

at Arm Limited, the world’s largest semiconductor IP

company, where he was VP, Corporate Development

and before that Adam worked at BT Group and

previously spent ten years in investment banking.

Adam therefore brings a well-developed network in the

technology sector in the UK and internationally, and

brings a wealth of experience of investing in, acquiring

and selling smaller companies. Adam is an experienced

M&A, corporate finance and investment professional,

a qualified management accountant (CIMA), and has

served on the boards of various early-stage technology

companies.

Jonathan Cartwright

Chair of the Audit & Risk Committee (appointed

1 October 2019) is currently Chairman of Columbia

Threadneedle Capital and Income Investment Trust

PLC. Jonathan is a chartered accountant and has

significant experience of the investment trust and VCT

sectors and of serving on the boards of both public and

private companies in executive and non-executive roles.

Purvi Sapre

(appointed 6 June 2022) is currently a Managing

Director of Sustainable Development Capital LLP, the

Investment Manager of SDCL Energy Efficiency Income

Trust plc “SEEIT”. She is the fund manager for SEEIT

and is a member of the SEEIT Investment Committee.

Purvi has over 15 years’ investment experience in the

UK and international capital markets, investing on behalf

of debt, equity and impact investment funds, including in

energy efficiency and renewable energy projects, across

a range of financing structures. She has transacted and

managed assets across a number of energy efficiency

and renewable energy projects.

Directors

CORPORATE GOVERNANCE

Secretary

The City Partnership (UK) Limited

The Mending Rooms

Park Valley Mills

Meltham Road

Huddersfield

HD4 7BH

Registered No: SC269164

Registered Office of the Company

5th Floor

Valiant Building

14 South Parade

Leeds

LS1 5QS

Registered No:

03134749

British Smaller Companies VCT plc Annual Report & Accounts

37

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

The directors present their report and

audited financial statements of

British Smaller Companies VCT plc

("the Company") for the year ended

31 March 2023.

Principal Activity

The Company is a public limited company incorporated

and domiciled in the United Kingdom. The address of

the registered office and principal place of business

is 5th Floor, Valiant Building, 14 South Parade, Leeds,

LS1 5QS.

The Company has its primary, and sole, listing on the

London Stock Exchange.

The principal activity of the Company is the making

of long term equity and loan investments, mainly in

unquoted businesses.

The Company operates as a venture capital trust

(“VCT”) and has been approved by HM Revenue &

Customs as an authorised venture capital trust under

Chapter 3 Part 6 of the Income Tax Act 2007. It is

the directors’ intention to continue to manage the

Company’s affairs in such a manner as to comply

with Chapter 3 Part 6 of the Income Tax Act 2007.

Business Performance and Future Prospects

A detailed and fair review of the Company’s business, its

development, its financial performance during and at the

end of the financial year, and its future prospects is set

out in the Strategic Report on pages 5 to 35. The

principal risks and uncertainties the Company faces

are detailed on pages 31 to 33.

The Board believes that the Annual Report and Financial

Statements taken as a whole is fair, balanced and

understandable and provides the information necessary

for shareholders to assess the Company’s performance,

business model and strategy.

Results and Dividends

The Statement of Comprehensive Income is set out on

page 60. The profit before and after taxation for the year

amounted to £12,237,000 (2022: £28,264,000).

During the year the Company paid a total of

£15,884,000 (2022: £13,099,000) in dividends totalling

8.5 pence per ordinary share (2022: 9.0 pence). A

detailed review can be found in note 5 on page 74.

The directors have announced an interim dividend of

2.0 pence per ordinary share for the year ending 31

March 2024. The dividend will be paid on 28 July 2023

to shareholders on the register on 30 June 2023.

The net asset value per ordinary share at 31 March

2023 was 83.7 pence (2022: 85.7 pence). The transfer

to and from reserves is given in the Statement of

Changes in Equity on page 62.

Going Concern

The directors have carefully considered the issue of

going concern in view of the Company’s activities and

associated risks. The Company has a well-diversified

portfolio with businesses in a variety of sectors, many of

which are well funded. Some portfolio companies may

require additional funding in the near- to medium-term;

the Company is well placed to provide this, where

appropriate.

The Company has a significant level of liquidity, which

was enhanced by the April 2023 fundraising. In addition,

the Board has control over, and can flex as appropriate,

the Company’s major outgoings, which predominantly

comprise investments, dividends and share buy-backs.

The directors have also assessed whether material

uncertainties exist and their potential impact on the

Company’s ability to continue as a going concern; they

have concluded that no such material uncertainties exist.

The directors have carefully considered the issue of

going concern and are satisfied that the Company has

sufficient resources to meet its obligations as they fall

due for a period of at least 12 months from the date of

this report. As at 31 March 2023, the Company held

cash balances, money market funds, listed investment

funds and fixed term deposits with a combined value of

£32,312,000; this excludes net proceeds of £44,349,000

from the 2022/23 fundraising, which were received in

April 2023. Cash flow projections show the Company

has sufficient funds to meet both its contracted

expenditure and its discretionary cash outflows in the

Directors’

Report

For the year ended 31 March 2023

38

British Smaller Companies VCT plc Annual Report & Accounts

CORPORATE GOVERNANCE

form of share buy-backs and dividends. In the year

ended 31 March 2023, the Company’s costs and

discretionary expenditures were:

£’000

Administrative expenses

(before fair value movements related

to credit risk and incentive fee)3,480

Dividends (before DRIS)15,884

Total21,861

Taking all of the above into consideration, the directors

are satisfied that the Company has sufficient resources

to meet its obligations for at least 12 months from the

date of this report and therefore believe that it is

appropriate to continue to apply the going concern basis

of accounting in preparing the financial statements.

Statement on Long-term Viability

The AIC’s Code of Corporate Governance requires

the Board to assess the Company’s viability over an

appropriate period. The directors believe that a period

of three years is appropriate to assess the Company’s

viability because the Company is required to invest

funds raised within this timeframe in order to retain its

status as a VCT.

In making their assessment, the directors have reviewed

the types of investment that the Company will be able to

make under current VCT legislation and they believe that

the existing portfolio and future investments will be able

to deliver the Company’s objective “to maximise total

return and provide investors with a long-term tax free

dividend yield whilst maintaining the Company’s status

as a venture capital trust”.

The directors have also taken into account the emerging

and principal risks and their mitigation identified in the

Strategic Report on pages 31 to 33, the nature of the

Company’s business, including its reserves of cash (plus

the proceeds received following the allotment of the

2022/23 fundraising in April 2023), the potential of its

investment portfolio to generate returns in the future and,

as noted above, the ability of the directors to minimise

the level of cash outflows, should this be necessary.

Taking into account the Company’s current position and

principal risks, the directors have concluded that there is

a reasonable expectation that the Company will be able

to continue in operation and meet its liabilities as they

fall due over that period.

Corporate Governance

The statement on corporate governance set out on

pages 41 to 48 is included in the Directors’ Report

by reference.

Share buy-backs2,497

Directors’ and Officers’ Liability Insurance

The Company has, as permitted by the Companies Act

2006, maintained insurance cover on behalf of the

directors, indemnifying them against certain liabilities

which may be incurred by any of them in relation to

the Company.

Provision of Information to the External Auditor

The directors confirm that so far as each director is

aware, there is no relevant audit information of which the

Company’s auditor is unaware; and that each of the

directors has taken all the steps that they ought to have

taken as a director in order to make themselves aware

of any relevant audit information and to establish that the

Company’s auditor is aware of that information.

Share Capital

As shown in note 11 of the financial statements, the

Company has only one class of share, being ordinary

shares of 10 pence each.

Buy-back and Issue of Ordinary Shares

Under the existing authority, which expires on the

conclusion of the Company’s Annual General Meeting in

2023 or on 10 September 2023, whichever is the later,

the Company has the power to purchase shares up to

14.99 per cent of the Company’s ordinary share capital

as at 24 June 2020, being 20,672,266 ordinary shares.

This authority will be replaced by a new authority at the

forthcoming Annual General Meeting.

During the year, the Company purchased 3,172,783

ordinary shares of 10 pence each in the market (as

disclosed in the table on page 39), for aggregate

consideration, including costs, of £2,497,000. These

shares are held in treasury. The buy-back was in

accordance with the Company’s buy-back policy, and

under the authorities granted by the shareholders at the

general meeting held on 10 September 2020. At 31

March 2023 22,007,765 shares were held in treasury,

representing 10.5 per cent of the total issued share

capital (including treasury shares) at that date.

Directors’

Report

(continued)

British Smaller Companies VCT plc Annual Report & Accounts

39

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

The directors have unconditional authority to allot shares

in the Company or to grant rights to subscribe for or to

convert any security into ordinary shares in the Company

up to an aggregate nominal amount of £8,000,000

(equivalent to 80,000,000 shares), expiring on 16

September 2023.

This authority will be replaced by a new authority to issue

shares up to an aggregate nominal amount of

£8,000,000 at this year’sAnnual General Meeting.

In addition, the directors have unconditional authority

to allot shares and waive pre-emption rights in the

Company in connection with the Company’s Dividend

Re-investment Scheme (DRIS), which expires on the

commencement of the Annual General Meeting in 2023.

This authority will be replaced by a new authority to issue

shares up to an aggregate nominal value of £1,500,000

(equivalent to 15,000,000 shares) at the forthcoming

Annual General Meeting.

During the year to 31 March 2023, a total of 4,591,917

ordinary shares were issued under the Company’s DRIS.

Buy-back of Shares

Date

Number of

Ordinary shares

of 10p

bought back

Percentage

of issued

share capital

at that date

Consideration

paid per

ordinary

share (pence)

28 June 2022

474,729

0.25%

80.02

27 September 2022

702,214

0.38%

79.16

16 December 2022

775,240

0.41%

75.08

28 March 2023

1,220,600

0.65%

79.16

Capital Disclosures

The following information has been disclosed in

accordance with Schedule 7 of the Large and Medium

Sized Companies and Groups (Accounts and Reports)

Regulations 2008 (as amended):

>The Company’s capital structure is summarised in

note 11 to the financial statements. Each ordinary

share carries one vote. There are no restrictions on

voting rights or any agreement between holders of

securities that result in restrictions on the transfer

of securities or on voting rights;

>There are no securities carrying special rights with

regard to the control of the Company;

>The Company does not have an employee

share scheme;

>The rules concerning the appointment and

replacement of directors, amendments to the

Articles of Association and powers to issue or buy-

back the Company’s shares are contained in the

Articles of Association of the Company and the

Companies Act 2006;

>With the exception of the Manager’s Incentive

Agreement, there are no agreements to which the

Company is party that take effect, alter or terminate

upon a change in control following a takeover bid;

and

>There are no agreements between the Company

and its directors providing for compensation for loss

of office that may occur because of a takeover bid.

Environment

The Company is a low energy user and is therefore

exempt from the reporting obligations under the

Companies (Directors’ Report) and Limited Liability

Partnerships (Energy and Carbon Report) Regulations

2018. The Company has no greenhouse gas emissions

to report from the operations of the Company, nor does it

have responsibility for any emissions producing sources

including those within its underlying investment portfolio

under part 7 of schedule 7 to the Large and Medium-

sized Companies and Groups (Accounts and Reports)

Regulations 2008, as amended.

Directors and their Interests

The directors of the Company at 31 March 2023, their

interests and contracts of significance are set out in the

Directors’ Remuneration Report on pages 49 to 51.

40

British Smaller Companies VCT plc Annual Report & Accounts

CORPORATE GOVERNANCE

Directors’

Report

(continued)

Substantial Shareholdings

The directors are not aware of any substantial

shareholdings representing 3 per cent or more of the

Company’s issued share capital as at 31 March 2023

and the date of this report.

Independent Auditor

BDO LLP has indicated its willingness to continue in

office and a resolution concerning its reappointment will

be proposed at the Annual General Meeting.

There were no non-audit services provided by BDO LLP

during the year.

Financial Instruments

Details of the financial instruments held by the Company

and the risks associated with them are set out on pages

86 to 90 and this information is accordingly incorporated

into the Directors’ Report by reference.

Employment Policies

The employment policies of the Company are set out on

page 49.

Events after the Balance Sheet Date

On 4 April 2023 the Company allotted shares from its

fully subscribed 2022/23 share offer. £44.3 million was

raised by the Company, resulting in the allotment of

53,559,905 ordinary shares. This increased the number

of ordinary shares issued with voting rights to

241,239,184.

Following the year end, one follow-on investment of

£0.8 million has been completed into Relative Insight,

and the Company realised its investment in Ncam, in

line with the valuation at 31 March 2023, with initial

proceeds of £1.4 million being received.

Annual General Meeting

Shareholders will find the Notice of the Annual General

Meeting on pages 92 to 96 of these financial statements.

The business of the meeting includes an ordinary

resolution (Resolution 9) proposed to ensure the

directors retain the authority to allot shares in the

Company until the later of 14 September 2024 or the

date of the 2024 Annual General Meeting up to an

aggregate nominal amount of £8,000,000 (representing

approximately 33.2 per cent of the issued ordinary share

capital of the Company as at 16 June 2023, excluding

treasury shares).

Resolution 10 is an additional ordinary resolution

proposed to ensure the directors retain the authority to

allot shares in the Company under the Company’s DRIS

until the later of 14 September 2024 or the date of the

2024 Annual General Meeting up to an aggregate

nominal amount of £1,500,000 (representing

approximately 6.2 per cent of the issued ordinary share

capital of the Company as at 16 June 2023, excluding

treasury shares).

Also included are the following special resolutions:

Resolution 11 is proposed to empower the directors to

allot shares under the authority granted by the ordinary

resolution (Resolution 9) above and to sell treasury

shares without regard to any rights of pre-emption on the

part of the existing shareholders.

Resolution 12 is proposed to empower the directors to

allot shares under the authority granted by the ordinary

resolution (Resolution 10) above without regard to any

rights of pre-emption on the part of the existing

shareholders.

Resolution 13 is proposed to renew the existing share

buy-back authority which expires on the later of 10

September 2023 or the date of the 2023 Annual General

Meeting (shares purchased under this authority may be

placed in treasury).

This report was approved by the Board on 16 June 2023

and signed on its behalf by

Rupert Cook

Chairman

British Smaller Companies VCT plc

Registered number 03134749

British Smaller Companies VCT plc Annual Report & Accounts

41

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

The Board is committed to the

principle and application of sound

corporate governance and confirms

that the Company has taken steps,

appropriate to a venture capital trust

and relevant to its size and

operational complexity, to comply

with the principles and

recommendations of the Association

of Investment Companies’ Code of

Corporate Governance issued in

February 2019 (“AIC Code”) available

on the AIC website www.theaic.co.uk.

The AIC Code addresses all the principles set out in the

UK Corporate Governance Code issued by the Financial

Reporting Council (“FRC”), as well as setting out

additional principles and recommendations on issues

which are of specific relevance to the Company.

The UK Corporate Governance Code can be found on

the website of the FRC at www.frc.org.uk.

The Board considers that reporting against the principles

and recommendations of the AIC will provide better

information to shareholders.

The Company is committed to maintaining the highest

standards of corporate governance and during the year

to 31 March 2023 complied with the recommendations of

the AIC Code and relevant provisions of the UK

Corporate Governance Code, except as set out below.

The UK Corporate Governance Code includes

provisions relating to the appointment of a chief

executive and a recognised senior independent non-

executive director, the presumption concerning the

Chairman’s independence and the need for an internal

audit function. For reasons set out in the AIC Code, and

in the introduction to the UK Corporate Governance

Code, the Board considers these provisions are not

relevant to the position of British Smaller Companies

VCT plc, which is an externally advised venture capital

trust. The Company has therefore not reported further in

respect of these provisions.

Role of the Board

An agreement between the Company and YFM Private

Equity Limited sets out the matters over which the

Manager has authority. This includes monitoring of the

Company’s assets and the provision of accounting,

company secretarial, administration and some marketing

services. All other matters are reserved for the approval

of the Board. A formal schedule of matters reserved to

the Board for decision has been approved. This includes

determination and monitoring of the Company’s

investment objectives and policy and its future strategic

direction, gearing policy, management of the capital

structure, appointment and removal of third party service

providers, review of key investment and financial data

and the Company’s corporate governance, risk control

and custody arrangements.

The Board meets at least quarterly; additional meetings

are arranged as necessary. Full and timely information is

provided to the Board to enable it to function effectively

and to allow directors to discharge their responsibilities.

There is an agreed procedure for directors to take

independent professional advice if necessary, at the

Company’s expense. This is in addition to the access

that every director has to the advice and services of the

Company Secretary, who is responsible to the Board for

ensuring that applicable rules and regulations are

complied with and that Board procedures are followed.

The Company indemnifies its directors and officers and

has purchased insurance to cover its directors. Neither

the insurance nor the indemnity provide cover if the

director has acted fraudulently or dishonestly.

The Board reviews the performance of the Manager on

an ongoing basis and confirms that it is satisfied with the

contractual arrangement in place. The Board considers

that due to its small size, it would be unnecessarily

burdensome to establish a separate management

engagement committee, as the Board fulfils this function.

Board Composition

The Board consists of four non-executive directors, all of

whom are regarded by the Board as independent of

each other and also of the Company’s Manager,

including the Chairman. The independence of the

Chairman was assessed upon his appointment.

Although the UK Corporate Governance Code presumes

that the chairman of a company is deemed not to be an

independent director, the remaining directors, having

considered the nature of the role in the Company, are

satisfied that Mr R Cook fulfils the criteria for

Corporate

Governance

42

British Smaller Companies VCT plc Annual Report & Accounts

CORPORATE GOVERNANCE

independence as a non-executive director. The directors

have a breadth of investment, business and financial

skills and experience relevant to the Company’s

business and provide a balance of power and authority

including recent and relevant financial experience.

Brief biographical details of each director are set out

on page 36.

A review of Board composition and balance is included

as part of the annual performance evaluation of the

Board, details of which are given below.

There are no executive officers of the Company.

Given the structure of the Board and the fact that the

Company’s administration is conducted by YFM Private

Equity Limited, the Company has not appointed a chief

executive officer or a senior independent non-executive

director. In addition, the directors consider that the role

of a senior independent non-executive director is taken

on by all of the directors. Shareholders are therefore

able to approach any director with any queries they

may have.

Boardroom Diversity

The Board is committed to ensuring that the Company

is run in the most effective manner. Consequently the

Board monitors the diversity of all directors to ensure

an appropriate level of experience and qualification.

The Board considers that it complies with DTR

requirements relating to Board diversity, except as

set out below. As noted above, there are no executive

officers of the Company, and the directors consider

that the role of a senior independent non-executive

director is taken on by all of the directors.

The proportion of female directors during the year has

ranged from 25 per cent to 40 per cent and stood at 25

per cent at year-end, as did the proportion of directors

from an ethnically diverse background.

The Board believes in the value and importance of

diversity in the boardroom but does not consider that it is

appropriate or in the best interests of the Company

and its shareholders to set prescriptive targets for

gender or nationality on the Board.

Diversity of thought, experience and approach are all

important and the directors will always seek to appoint

on merit against objective criteria.

Tenure

Directors are initially appointed until the following Annual

General Meeting when, under the Company’s Articles of

Association, it is required that they be elected by

shareholders. Thereafter, it is the Board’s policy that a

director’s appointment will run for a term of one year until

the next Annual General Meeting. Subject to the

performance evaluation carried out each year, the Board

will agree whether it is appropriate for the director to

seek a further term. The Board, when making a

recommendation, will take into account the ongoing

requirements of The UK Corporate Governance Code,

including the need to refresh the Board and its

Committees.

The Board seeks to maintain a balance of skills and the

directors are satisfied that as currently composed the

balance of experience and skills of the individual

directors is appropriate for the Company, in particular

with regards to investment appraisal and investment

risk management.

The terms and conditions of directors’ appointments are

set out in formal letters of appointment, copies of which

are available for inspection on request at the Company’s

registered office and at the Annual General Meeting. All

appointments are terminable by either the director or the

Company on three months’ notice.

The directors recommend the re-election of Mr A C N

Bastin, Mr J H Cartwright, Mr R Cook and Ms P Sapre

at this year’sAnnual General Meeting, because of their

commitment, experience and contribution to the

Company.

Meetings and Committees

The Board delegates certain responsibilities and

functions to Committees. Directors who are not

members of Committees may attend at the invitation

of the Chairman.

The table on page 43 details the number and function

of the meetings attended by each director.

During the year there were nine formal Board meetings,

three Audit & Risk Committee meetings, one

Nominations & Remuneration Committee meeting

and one General meeting. The directors met via video,

telephone and electronic conferences on 33 other

occasions.

Corporate

Governance

(continued)

British Smaller Companies VCT plc Annual Report & Accounts

43

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

In addition, there were three DRIS allotment meetings

which the directors were not required to attend, but

which were attended by the Company Secretary.

Training and Appraisal

On appointment, the Manager and Company Secretary

provide all directors with induction training. Thereafter,

regular briefings are provided on changes in regulatory

requirements that affect the Company and its directors.

Directors are encouraged to attend industry and other

seminars covering issues and developments relevant

to VCTs.

The performance of the Board has been evaluated in

respect of the financial year ended 31 March 2023.

The Board, led by the Chairman, has conducted a

performance evaluation to determine whether it and

individual directors are functioning effectively.

The factors taken into account were based on the

relevant provisions of The UK Corporate Governance

Code and included attendance and participation at

Board and Committee meetings, commitment to Board

activities and the effectiveness of their contribution.

The results of the overall evaluation process are

communicated to the Board. Performance evaluation

continues to be conducted on an annual basis.

The Chairman has confirmed that the performance

of the other directors being proposed for re-election

continues to be effective and that they continue to show

commitment to the role. The independent directors have

similarly appraised the performance of the Chairman.

They considered that the performance of Mr R Cook

continues to be effective.

Audit & Risk Committee

The Board considers that due to its small size it is

appropriate for all non-executive directors to be

members of the Audit & Risk Committee; the Company’s

Chairman confirmed their independence upon

appointment and thus was eligible to join the Committee.

The Committee meets at least three times each year.

The directors consider that it is appropriate that the

Chairman of the Committee should be Mr J H

Cartwright. The members of the Committee consider

that they have the requisite skills and experience to

fulfil the responsibilities of the Committee, and that the

Chairman of the Committee meets the requirements of

The UK Corporate Governance Code as to recent and

relevant financial experience.

The Audit & Risk Committee’s terms of reference include

the following roles and responsibilities:

>Monitoring and making recommendations to the

Board in relation to the Company’s published

financial statements (including in relation to the

valuation of the Company’s unquoted investments)

and other formal announcements relating to the

Company’s financial performance;

>Monitoring and making recommendations to the

Board in relation to the Company’s internal control

(including internal financial control) and risk

management systems;

>Annually considering the need for an internal

audit function;

>Making recommendations to the Board in relation

to the appointment, re-appointment and removal of

the external auditor and approving the remuneration

and terms of engagement of the external auditor;

Meetings attended

Director

Mr R Mr A C N

Cook Bastin

Mr J H

Cartwright

Ms PMs H

Sapre*Sinclair**Total

Board meetings

98

6

839

Audit & Risk Committee

33

3

313

Nominations & Remuneration Committee

11

1

111

Video, telephone & electronic conferences

3133

33

271633

General meeting

11

1

111

Total

4546

44

402247

* from date of appointment on 6 June 2022

** up to date of retirement as Chairman on 16 September 2022

44

British Smaller Companies VCT plc Annual Report & Accounts

CORPORATE GOVERNANCE

Corporate

Governance

(continued)

>Reviewing and monitoring the external auditor’s

independence and objectivity and effectiveness of

the audit process, taking into consideration relevant

UK professional and regulatory requirements;

>Monitoring the extent to which the external auditor

is engaged to supply non-audit services; and

>Ensuring that the Manager has arrangements in

place for the investigation and follow-up of any

concerns raised confidentially by staff in relation to

the propriety of financial reporting or other matters.

It reviews the terms of the investment agreement and

examines the effectiveness of the Company’s internal

control and risk management systems, receives

information from the Manager’s compliance department

and reviews the scope and results of the external audit,

its cost effectiveness and the independence and

objectivity of the external auditor.

The directors’ statement on the Company’s system

of internal control is set out on pages 47 and 48.

The Audit & Risk Committee has written terms of

reference which clearly define its responsibilities, copies

of which are available for inspection on request at the

Company’s registered office and at the Annual General

Meeting, and also on the Company’s website at

www.bscfunds.com.

The Company does not have an independent internal

audit function as it is not deemed appropriate given the

size of the Company and the nature of its business.

However, the Committee considers annually whether

there is a need for such a function and, if so, would

recommend this to the Board.

During the year ended 31 March 2023 the Audit & Risk

Committee discharged its responsibilities by:

>Reviewing and approving the external auditor’s

terms of engagement, remuneration and

independence;

>Reviewing the external auditor’s plan for the audit

of the Company’s financial statements, including

identification of key risks;

>Reviewing YFM Private Equity Limited’s statement

of internal controls operated in relation to the

Company’s business and assessing the

effectiveness of those controls in minimising

the impact of key risks;

>Reviewing reports on the effectiveness of the

Manager’s compliance procedures;

>Reviewing the appropriateness of the Company’s

accounting policies;

>Reviewing the Company’s draft annual financial

statements, half yearly results statement and

interim management statements prior to Board

approval, including the proposed fair value of

investments as determined by the directors;

>Reviewing the external auditor’s detailed reports

to the Committee on the annual financial

statements; and

>Recommending to the Board and shareholders

the re-appointment of BDO LLP as the Company’s

external auditor.

The key areas of risk that have been identified and

considered by the Audit & Risk Committee in relation to

the business activities and financial statements of the

Company are as follows:

>Valuation of unquoted investments; and

>Compliance with HM Revenue & Customs’

conditions for maintenance of approved venture

capital trust status.

These issues were discussed with the Manager and the

auditor at the pre-year end audit planning meeting and

at the conclusion of the audit of the financial statements.

Valuation of Unquoted Investments

The Audit & Risk Committee reviewed the estimates

and judgements made in the investment valuations and

was satisfied that they were appropriate. The Manager

confirmed to the Audit & Risk Committee that the

investment valuations had been carried out consistently

with prior periods and in accordance with published

industry guidelines, taking account of the latest available

information about investee companies; current market

data; and a report from the auditor, including key audit

findings in respect of the valuations.

Venture Capital Trust Status

The Manager confirmed to the Audit & Risk Committee

that the conditions for maintaining the Company’s status

as an approved venture capital trust had been complied

with throughout the year. The position was also reviewed

by the Company’s advisers.

British Smaller Companies VCT plc Annual Report & Accounts

45

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

Financial Statements

The Manager confirmed to the Audit & Risk Committee

that it was not aware of any material unadjusted

misstatements. Having reviewed the reports received

from the Manager and the auditor, the Audit & Risk

Committee is satisfied that the key areas of risk and

judgement have been appropriately addressed in the

financial statements and that the significant assumptions

used in determining the value of assets and liabilities

and revenue recognition have been properly appraised

and are sufficiently robust.

Relationship with the Auditor

The Committee is responsible for overseeing the

relationship with the external auditor, assessing the

effectiveness of the external audit process and making

recommendations on the appointment and removal

of the external auditor. It makes recommendations

to the Board on the level of audit fees and the terms

of engagement for the auditor. The external auditor

is invited to attend committee meetings, where

appropriate, and also meets with the Committee

and its Chairman without the representatives of the

Manager being present.

The Committee undertakes a review of the external

auditor’s effectiveness of the audit process. The

Committee considers whether the auditor has:

>Demonstrated strong technical knowledge and

clear understanding of the business;

>Indicated professional scepticism in key judgements

and raised any significant issues in advance of the

audit process commencing;

>Allocated an audit team that is appropriately

resourced;

>Demonstrated a proactive approach to the audit

planning process and engaged with the Committee

Chairman and other key individuals within the

business;

>Provided a clear explanation of the scope and

strategy of the audit;

>Demonstrated the ability to communicate clearly

and promptly with the members of the Committee

and the Manager and produce comprehensive

reports on its findings;

>Demonstrated that it has appropriate procedures

and safeguards in place to maintain its

independence and objectivity; and

>Charged justifiable fees in respect of the scope

of services provided.

The Board regularly reviews and monitors the external

auditor’s independence and objectivity. As part of this

process it reviews the nature and extent of services

supplied by the auditor to ensure that independence is

maintained. It is the Company’s policy to contract the

external auditors to perform audit-related services only.

The auditor prepares an audit strategy document on

an annual basis. This provides information on the

audit team and timetable, audit scope and objectives,

evaluation of materiality, initial assessment of key audit

and accounting risks, confirmation of independence and

proposed fees. This is reviewed and approved by the

Committee with an opportunity to consider the audit

approach and to raise any queries with the auditor.

The outcome of the review together with any actions

that have arisen are formally minuted and a summary

is submitted to the Board for consideration.

The Committee assesses the effectiveness of the

external audit process annually and makes a

recommendation to the Board on the re-appointment

of the auditor. This is considered by the Board prior

to agreeing the recommendation to shareholders for the

re-appointment of the auditor at each Annual General

Meeting of the Company. As part of its review, the

Committee considers the performance of the auditor

and whether it has met the agreed audit plan, the quality

of its reporting in its management letter and the cost

effectiveness of the services provided as well as the

manner in which it has handled key audit issues and

responded to the Committee’s questions.

As part of the review of audit effectiveness and

independence, BDO LLP has confirmed that it is

independent of the Company and has complied with

applicable auditing standards. BDO LLP has held

office for nine years; in accordance with professional

guidelines the previous engagement partner was rotated

off the audit after five years; this is the second year of

the current partner’s tenure. The Committee notes there

is a requirement to tender every ten years, and that the

last tender process was performed in the year ended 31

March 2014.

46

British Smaller Companies VCT plc Annual Report & Accounts

Corporate

Governance

(continued)

CORPORATE GOVERNANCE

Having completed its review, the Audit & Risk Committee

is satisfied that BDO LLP remained effective and

independent in carrying out its responsibilities up to the

date of signing this report and its recommendation for

reappointment is endorsed by the Board. No non-audit

services were provided by BDO LLP during the year.

Nominations and Remuneration Committee

The Company has a combined Nominations and

Remuneration Committee. The Board considers that

due to its small size it is appropriate for all non-executive

directors, who are considered by the Board to be

independent of the Manager, to be members of the

Nomination and Remuneration Committee. Mr J H

Cartwright is Chairman of the Nominations and

Remuneration Committee. The Nominations and

Remuneration Committee reviews the Company’s

remuneration policy so as to determine and agree the

remuneration to be paid to each director of the Company

and is responsible for the production of the Directors’

Remuneration Report which may be found on pages

49 to 51.

In considering appointments to the Board, the

Nominations and Remuneration Committee takes into

account the ongoing requirements of the Company and

the need to have a balance of skills and experience

within the Board.

The Board considers succession planning at least

annually, especially in relation to the positions of the

Chairman and the Chairman of the Audit & Risk

Committee.

Investment Committee

The Investment Committee currently consists of the non-

executive directors. The Chairman of the Committee is

Mr R Cook.

The Investment Committee is authorised to make

investment decisions (including new investment, further

investment, variation and realisation decisions) on behalf

of the Board.

The Manager is authorised to approve follow-on

investment decisions of up to £600,000 on behalf of the

Company for well-performing investments.

The Investment Committee has written terms of

reference which define clearly its responsibilities, copies

of which are available for inspection on request at the

Company’s registered office and on the Company’s

website at www.bscfunds.com.

Allotment Committee

The Company has an Allotment Committee, which

consists of the directors, all of whom are considered by

the Board to be independent of the Manager. The

quorum for Committee meetings is one director, unless

otherwise determined by the Board. In addition, the

Company Secretary has an authority to allot shares

under the DRIS.

The Committee considers and, if appropriate, authorises

the allotment of shares. The Committee ensures that the

total number of shares to be issued does not exceed the

authority given by the shareholders. There are no written

terms of reference.

Relations with Shareholders

The Board regularly monitors the shareholder profile of

the Company. It aims to provide shareholders with a full

understanding of the Company’s activities and

performance, and reports formally to shareholders at

least twice a year by way of the Annual Report and the

Interim Report. This is supplemented by the daily

publication of the Company’s share price and the

publication of the net asset value of the Company for the

two quarters of the year where an Annual or Interim

Report is not normally issued (30 June and 31

December), through the London Stock Exchange.

All shareholders have the opportunity, and are

encouraged, to attend the Company’s Annual General

Meeting, at which the directors and representatives of

the Manager are available in person to meet with and

answer shareholders’ questions. In addition,

representatives of the Manager periodically hold

shareholder workshops which review the Company’s

performance and industry developments, and which give

shareholders a further opportunity to meet members of

the Board and chief executives or chairpersons of some

of the investee companies. During the year, the

Company’s Manager has held regular discussions with

shareholders. The directors are made fully aware of

shareholders’ views. The Chairman and directors make

themselves available, as and when required, to address

shareholder queries. The directors may be contacted

through the Company Secretary, whose details are

shown on page 36.

British Smaller Companies VCT plc Annual Report & Accounts

47

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

The Company’s Annual Report and Notice of the Annual

General Meeting are published in time to give

shareholders at least 21 clear days’ notice of the Annual

General Meeting. Shareholders wishing to raise

questions in advance of the meeting are encouraged to

write to the Company Secretary at the address shown

on page 36. Separate resolutions are proposed for each

separate issue. Proxy votes will be counted and the

results announced at the Annual General Meeting for

and against each resolution.

Internal Control and Risk Management

Under an agreement dated 28 February 1996, as varied

by agreements dated 1 July 2009, 16 November 2012,

17 October 2014, 24 August 2015 and 18 November

2019, certain functions of the Company have been sub-

contracted to YFM Private Equity Limited. The Board

receives operational and financial reports on the current

state of the Company and on appropriate strategic,

financial, operational and compliance issues. These

matters include, but are not limited to:

>A clearly defined investment strategy for the

Manager to the Company;

>All decisions concerning the acquisition or disposal

of investments are ratified by the Board;

>Regular reviews of the Company’s investments,

liquid assets and liabilities, revenue and

expenditure;

>Regular reviews of compliance with the VCT

regulations to retain its status; and

>The Board receives copies of the Company’s

management accounts on a regular basis showing

comparisons with budget. These include a report by

the Manager with a review of performance.

Additional information is supplied on request.

The Board confirms the procedures to implement the

guidance detailed in Principle O of the AIC Code were in

place throughout the year ended 31 March 2023 and up

to the date of this report. A detailed review of the risks

faced by the Company and the techniques used to

mitigate these risks can be found in the Strategic Report

on pages 31 to 33.

The Board acknowledges that it is responsible for

overseeing the Company’s system of internal control and

for reviewing its effectiveness. Such a system is

designed to manage rather than eliminate the risk of

failure to achieve business objectives and can only

provide reasonable and not absolute assurance against

material misstatement or loss.

The Board arranges its meeting agenda so that risk

management and internal control is considered on a

regular basis and a full robust risk and control

assessment takes place no less frequently than twice a

year. There is an ongoing process for identifying,

evaluating and managing the significant risks faced by

the Company. This process has been in place for longer

than the year under review and up to the date of

approval of the Annual Report. The process is formally

reviewed bi-annually by the Board. However, due to the

size and nature of the Company, the Board has

concluded that it is not necessary at this stage to set up

an internal audit function. This decision will be kept

under review. The directors are satisfied that the

systems of risk management that they have introduced

are sufficient to comply with the FRC Guidance on Risk

Management, Internal Control and Related Financial and

Business Reporting.

In particular the Board, together with the Audit & Risk

Committee, is responsible for overseeing and reviewing

internal controls concerning financial reporting. In

addition to those controls sub-contracted as listed

above, the following controls have been in place

throughout the year:

>A robust system of internal control is maintained by

the Manager over the preparation and reconciliation

of investment portfolio valuations;

>Monthly reconciliation of assets held as cash or on

fixed term deposit;

>Independent review of the valuations of portfolio

investments by the Board (quarterly);

>The Audit & Risk Committee’s review of financial

reporting and compliance (as set out on pages 43

to 46);

>The Board reviews financial information including

the Annual Report, Interim Report and interim

management statements prior to their external

communication; and

>The Board reviews the financial information in any

prospectus or offer for subscription issued by the

Company in connection with the issue of new share

capital.

The Company was registered with the FCA as a Small

Registered Alternative Fund Manager until 24 March

2021 and up to that date held its own investments.

From that date, the Manager became the Company’s

Alternative Investment Fund Manager and took over

responsibility for the custody of the Company’s

investments. All certificates and other documents

48

British Smaller Companies VCT plc Annual Report & Accounts

Corporate

Governance

(continued)

CORPORATE GOVERNANCE

evidencing title (whether or not in registered form)

are received by the Company and are held in the

Company’s name and held in custody by the Manager.

No third party custodian has been appointed. The

Company takes legal ownership of its assets.

The Board has reviewed the effectiveness of the

Company’s systems of internal control and risk

management for the year and up to the date of this

Report. The Board is of the opinion that the Company’s

systems of internal, financial, and other controls are

appropriate to the nature of its business activities and

methods of operation given the size of the Company,

and the Board has a reasonable expectation that the

Company will continue in operational existence for the

foreseeable future.

Conflicts of Interest

The directors have declared any conflicts or potential

conflicts of interest to the Board, which has the authority

to authorise such situations if appropriate. The Company

Secretary maintains the Register of Directors’ Interests,

which is reviewed quarterly by the Board, when changes

are notified, and the directors advise the Company

Secretary and the Board as soon as they become aware

of any conflicts of interest. Directors who have conflicts

of interest which have been approved by the Board do

not take part in discussions or decisions which relate to

any of their conflicts.

The Board notes Mr R Cook’s position as a shareholder

of Xapien, a portfolio investment of the Company.

In making the investment into Xapien, the Company’s

conflicts of interest policy was followed, with Mr R Cook

recused from all decision making.

Corporate Governance in Relation to Investee

Companies

The Company delegates responsibility for monitoring

its investments to its Manager whose policy, which

has been noted by the Board, is as follows:

YFM Private Equity Limited is committed to introducing

corporate governance standards into the companies in

which its clients invest. With this in mind, the Company’s

investment agreements contain contractual terms

specifying the required frequency of management board

meetings and of annual shareholders’ meetings, and for

representation at such meetings through YFM Private

Equity Limited. In addition, provision is made for the

preparation of regular and timely management

information to facilitate the monitoring of an investee

company performance in accordance with best practice

in the private equity sector.

Co-Investment

Typically, the Company invests alongside other venture

capital funds and other private equity funds managed by

the Manager, such syndication spreading investment

risk. Details of the amounts invested in individual

companies are set out in the Strategic Report. Co-

investments are detailed in note 7 to the financial

statements on pages 81 to 83.

Management

The Board has delegated the monitoring of the

investment portfolio to the Manager.

This report was approved by the Board on 16 June 2023

and signed on its behalf by

Rupert Cook

Chairman

British Smaller Companies VCT plc

Registered number 03134749

British Smaller Companies VCT plc Annual Report & Accounts

49

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

The Board has prepared this report

in accordance with the requirements

of the Large and Medium Sized

Companies and Groups (Accounts

and Reports) (Amendment)

Regulations 2013. Ordinary

resolutions for the approval of

this report and the Directors’

Remuneration Policy will be put to

the members at the forthcoming

Annual General Meeting.

The law requires the Company’s auditor, BDO LLP, to

audit certain information included in this report. Where

disclosures have been audited, they are indicated as

such. The auditor’s opinion is included in the

Independent Auditor’s Report on pages 53 to 59.

Directors’ Remuneration Policy

This statement of the Directors’ Remuneration Policy

took effect following approval by shareholders at the

Annual General Meeting held on 10 September 2020.

A resolution to approve the Directors’ Remuneration

Policy will be put to shareholders every three years.

The Board comprises four directors, all of whom are

non-executive. The Company currently has an

independent Nominations & Remuneration Committee,

which is comprised of the full Board and of which Mr J H

Cartwright is the independent Chairman.

The Board has not retained external advisors in relation

to remuneration matters but has access to information

about directors’ fees paid by other companies of a

similar size and nature and this is used as a reference

when setting directors’ remuneration. Shareholders’

views in respect of the directors’ remuneration are

communicated at the Company’s AGM and are taken

into consideration in formulating the Directors’

Remuneration Policy.

At the last Annual General Meeting, 96 per cent of

shareholders who exercised their voting rights voted for

the resolution approving the Directors’ Remuneration

Report, showing significant shareholder approval.

The Board’s policy is that the remuneration of non-

executive directors should reflect the experience of the

Board as a whole, to be fair and comparable to that of

other relevant venture capital trusts that are similar in

size and have similar investment objectives and

structures. Furthermore, the level of remuneration

should be sufficient to attract and retain the directors

needed to properly oversee the Company and to

reflect the duties and responsibilities of the directors

and the value and amount of time committed to the

Company’s affairs.

It is not considered appropriate that directors’

remuneration should be performance-related, and as

such the directors are not eligible for bonuses, share

options, pension benefits, long-term incentive schemes

or other benefits in respect of their services as non-

executive directors of the Company.

It is the Board’s policy that directors do not have service

contracts, but new directors are provided with a letter of

appointment. The terms of directors’ appointments

provide that directors should retire and be subject to

election at the first Annual General Meeting after their

appointment. Thereafter, it has been agreed that all

directors will offer themselves for re-election on an

annual basis. All directors’ appointments are terminable

by each director or the Company on three months’

notice. Any director who ceases to hold office is not

entitled to receive any payment other than accrued fees

(if any) for past services. There were no payments for

loss of office made during the period.

The policy will continue to be applied in the forthcoming

year, subject to approval at the forthcoming AGM.

Brief biographical notes on the directors are given on

page 36.

Statement by the Chairman of the Nominations &

Remuneration Committee

The directors have reviewed the level of directors’ fees

and, in light of the current inflationary environment,

agreed that with effect from 1 July 2023, they will be

increased by 5 per cent to £44,100 per annum for

the Chairman and £27,565 for the other directors.

In accordance with the Directors’ Remuneration Policy,

the directors have agreed that they should be reviewed

again in June 2024. The cap on aggregate annual fees

is £130,000.

Directors’

Remuneration Report

50

British Smaller Companies VCT plc Annual Report & Accounts

CORPORATE GOVERNANCE

Directors’ Remuneration for the year ended 31

March 2023 (audited)

The directors who served in the year and the previous

year received the following emoluments in the form of

fees, which represent the entire remuneration payable to

directors (see Table A):

There are no executive directors (2022: none).

Table A

Total Fixed Fees Paid (audited)

2023 2022

£ £

R Cook

34,82525,000

A C N Bastin

26,25025,000

J H Cartwright

26,25025,000

P Sapre

21,606-

H Sinclair19,43840,000

128,369115,000

With effect from 1 April 2022, the annual salary of the

Chairman was increased to £42,000 (previously

£40,000) and the annual salary of the other directors

was increased to £26,250 (previously £25,000). Prior to

that date the annual salaries of the Chairman and the

other directors had been unchanged since 1 April 2014.

The annual salary of Ms P Sapre from the date of her

appointment on 6 September 2022 was £26,250.

Table B

Total Fixed Fees Paid: Annual change

2023 2022 2021

% % %

R Cook0.0%*0.0%0.0%

A C N Bastin

5.0%0.0%0.0%*

J H Cartwright

5.0%0.0%0.0%*

P Sapre

n/an/an/a

* The annual salary of Mr A C N Bastin from the date of his appointment on 11

September 2019 was £25,000 and the annual salary of Mr J H Cartwright from the

date of his appointment on 1 October 2019 was £25,000. The annual salary of Mr R

Cook from the date of his appointment as Chairman on 16 November 2022 was

£42,000.

Directors and their Interests (audited)

The directors of the Company at 31 March 2023 and

their beneficial interests in the share capital of the

Company (including those of immediate family

members) were as shown in Table C:

Table C

Directors and their interests (audited)

Number ofPercentage of

ordinary shares at: voting rights:

31 March

2023

31 March

2022

31 March

2023

31 March

2022

R Cook

222,042

215,960

0.12%

A C N Bastin

13,247

0.01%

J H Cartwright

26,494

0.01%

P Sapre

n/a

None of the directors held any options to acquire

additional shares at the year end. Ms P Sapre was

allotted 7,028 ordinary shares on 4 April 2023 following

the Company’s fundraising.

The Company has not set out any formal requirement or

guidelines concerning their ownership of shares in the

Company.

Relative Importance of Spend on Pay

Directors’ remuneration, dividend distribution and share

buy-backs are shown in Table D:

The remuneration of the directors is fixed and contains

no performance related variable element. As the

Company has no employees, the directors do not

consider it relevant to compare directors’ fees against

employee pay.

TABLE D

Relative Importance of Pay

2023 2022

£ £

H Sinclairn/a0.0%0.0%

Dividends15,884,000 13,099,000

Share buy-backs

2,497,000

2,498,000

Total directors fees

128,369

115,000

Directors’

Remuneration Report

(continued)

British Smaller Companies VCT plc Annual Report & Accounts

51

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

Consideration of Employment Conditions of

Non-director Employees

The Company does not have any employees.

Accordingly, the disclosures required under paragraph

38 and 39 of Schedule 8 to the Large and Medium-sized

Companies and Groups (Accounts and Reports)

Regulations 2008 are not required.

Company Performance

The Board is responsible for the Company’s investment

strategy and performance, although the management of

the Company’s investment portfolio is delegated to the

Manager through the investment agreement, as referred

to in the Corporate Governance section.

Net asset value Total Return (calculated by reference to

the net asset value and cumulative dividends paid, as

set out in note 12 of these financial statements and

excluding tax reliefs received by shareholders) is the

primary recognised measure of performance in the VCT

industry. This measure is shown on page 11.

The graph above shows a comparison over the last ten

years of the movements in both the Company’s Share

Price Total Return and the Share Price Total Return for

an index of generalist VCTs which are members of the

AIC (based on figures provided by Morningstar). In line

with the index all the relative performance measures

have been rebased to 100 as at March 2013. The

directors consider this to be the most appropriate

published index on which to report on comparative

performance.

This report was approved by the Board and signed

on its behalf on 16 June 2023.

Rupert Cook

Chairman

VCT Generalist Share Price Total Return

(Source: Index compiled by Morningstar)*

BSC - Share Price Total Return

(Dividends re-invested since inception)*

* assumes dividends re-invested

100

150

200

250

300

20132014201520162017201820192020202120222023

Percentage movement per ordinary share

52

British Smaller Companies VCT plc Annual Report & Accounts

CORPORATE GOVERNANCE

The directors are responsible for

preparing the annual report and the

financial statements in accordance

with UK adopted international

accounting standards in conformity

with the requirements of the

Companies Act 2006 and applicable

law and regulations.

Company law requires the directors to prepare financial

statements for each financial year. Under that law the

directors are required to prepare the financial statements

in accordance with UK adopted international accounting

standards in conformity with the requirements of the

Companies Act 2006. Under Company law the directors

must not approve the financial statements unless they

are satisfied that they give a true and fair view of the

state of affairs of the Company and of the profit or loss

for the Company for that period.

In preparing these financial statements, the directors are

required to:

>Select suitable accounting policies and then apply

them consistently;

>Make judgements and accounting estimates that

are reasonable and prudent;

>State whether they have been prepared in

accordance with UK adopted international

accounting standards in conformity with the

requirements of the Companies Act 2006, subject to

any material departures disclosed and explained in

the financial statements;

>Prepare the financial statements on the going

concern basis unless it is inappropriate to presume

that the Company will continue in business; and

>Prepare a directors’ report, a strategic report and

directors’ remuneration report which comply with

the requirements of the Companies Act 2006.

The directors are responsible for keeping adequate

accounting records that are sufficient to show and explain

the Company’s transactions and disclose with reasonable

accuracy at any time the financial position of the

Company and enable them to ensure that the financial

statements comply with the Companies Act 2006.

They are also responsible for safeguarding the assets of

the Company and hence for taking reasonable steps for

the prevention and detection of fraud and other

irregularities. The directors are responsible for ensuring

that the annual report and accounts, taken as a whole,

are fair, balanced, and understandable and provide the

information necessary for shareholders to assess the

performance, business model and strategy.

Website Publication

The directors are responsible for ensuring the annual

report and the financial statements are made available

on a website. Financial statements are published on the

Company’s website www.bscfunds.com in accordance

with legislation in the United Kingdom governing the

preparation and dissemination of financial statements,

which may vary from legislation in other jurisdictions.

The maintenance and integrity of the Company’s

website is the responsibility of the directors. The

directors’ responsibility also extends to the ongoing

integrity of the financial statements contained therein.

Directors’ Responsibilities Pursuant to DTR4

The directors confirm to the best of their knowledge:

>The financial statements have been prepared in

accordance with UK adopted international

accounting standards in conformity with the

requirements of the Companies Act 2006 and give

a true and fair view of the assets, liabilities, financial

position and profit and loss of the Company; and

>The annual report includes a fair review of the

development and performance of the business and

the financial position of the Company, together with

a description of the principal risks and uncertainties

that they face.

The names and functions of all the directors are stated

on page 36.

This statement was approved by the Board and signed

on its behalf on 16 June 2023.

Rupert Cook

Chairman

Directors’ Responsibilities

Statement

British Smaller Companies VCT plc Annual Report & Accounts

53

Opinion on the financial statements

In our opinion the financial statements:

>give a true and fair view of the state of the Company’s

affairs as at 31 March 2023 and of its profit for the

year then ended;

>have been properly prepared in accordance with UK

adopted international accounting standards; and

>have been prepared in accordance with the

requirements of the Companies Act 2006.

We have audited the financial statements of British

Smaller Companies VCT plc (the ‘Company’) for the year

ended 31 March 2023 which comprise the Statement of

Comprehensive Income, the Balance Sheet, the

Statement of Changes in Equity, the Statement of Cash

Flows and the notes to the financial statements, including a

summary of significant accounting policies. The financial

reporting framework that has been applied in their

preparation is applicable law and UK adopted international

accounting standards.

Basis for opinion

We conducted our audit in accordance with International

Standards on Auditing (UK) (ISAs (UK)) and applicable

law. Our responsibilities under those standards are further

described in the Auditor’s responsibilities for the audit of

the financial statements section of our report. We believe

that the audit evidence we have obtained is sufficient and

appropriate to provide a basis for our opinion. Our audit

opinion is consistent with the additional report to the Audit

& Risk Committee.

Independence

Following the recommendation of the Audit & Risk

Committee, we were appointed by the Board of Directors

during 2014 and subsequently by the shareholders at the

AGM on 22 July 2014 to audit the financial statements for

the year ended 31 March 2014 and subsequent financial

periods. The period of total uninterrupted engagement

including retenders and reappointments is 10 years,

covering the years ended 31 March 2014 to 31 March

2023. We remain independent of the Company in

accordance with the ethical requirements that are relevant

to our audit of the financial statements in the UK, including

the FRC’s Ethical Standard as applied to listed public

interest entities, and we have fulfilled our other ethical

responsibilities in accordance with these requirements.

The non-audit services prohibited by that standard were

not provided to the Company.

Conclusions relating to going concern

In auditing the financial statements, we have concluded

that the directors’ use of the going concern basis of

accounting in the preparation of the financial statements

is appropriate. Our evaluation of the directors’ assessment

of the Company’s ability to continue to adopt the going

concern basis of accounting included:

>Obtaining the VCT compliance reports prepared by

management’s expert during the year and as at year

end and reviewing the calculations therein to check

that the Company was meeting its requirements to

retain VCT status;

>Consideration of the Company’s expected future

compliance with VCT legislation, the absence of bank

debt, contingencies and commitments and any

market or reputational risks;

>Reviewing the forecasted cash flows that support the

directors’ assessment of going concern, challenging

assumptions and judgements made in the forecasts,

and assessing them for reasonableness. In particular

we considered the available cash resources relative

to the forecast expenditure which was assessed

against the prior year for reasonableness; and

>Evaluating the directors’ method of assessing the

going concern in light of market volatility.

Based on the work we have performed, we have not

identified any material uncertainties relating to events or

conditions that, individually or collectively, may cast

significant doubt on the Company’s ability to continue as a

going concern for a period of at least twelve months from

when the financial statements are authorised for issue.

In relation to the Company’s reporting on how it has

applied the UK Corporate Governance Code, we have

nothing material to add or draw attention to in relation to

the Directors’ statement in the financial statements about

whether the Directors considered it appropriate to adopt

the going concern basis of accounting.

Our responsibilities and the responsibilities of the Directors

with respect to going concern are described in the relevant

sections of this report.

Independent

Auditor’s Report

to the members of British Smaller Companies VCT plc

INDEPENDENT AUDITOR’S REPORT

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

54

British Smaller Companies VCT plc Annual Report & Accounts

Overview

20232022

Key audit matters

Valuation of Unquoted Investments

33

Materiality

£2,500,000 (2022: £2,000,000) based on 2% (2022: 2%)

of total investments.

An overview of the scope of our audit

Our audit was scoped by obtaining an understanding of

the Company and its environment, including the

Company’s system of internal control, and assessing the

risks of material misstatement in the financial statements.

We also addressed the risk of management override of

internal controls, including assessing whether there was

evidence of bias by the directors that may have

represented a risk of material misstatement.

Key audit matters

Key audit matters are those matters that, in our

professional judgement, were of most significance in our

audit of the financial statements of the current period and

include the most significant assessed risks of material

misstatement (whether or not due to fraud) that we

identified, including those which had the greatest effect on:

the overall audit strategy, the allocation of resources in the

audit, and directing the efforts of the engagement team.

These matters were addressed in the context of our audit

of the financial statements as a whole, and in forming our

opinion thereon, and we do not provide a separate opinion

on these matters.

Key audit matter

How the scope of our audit addressed the key audit matter

Valuation of unquoted

investments (Note 1

and Note 7)

We consider the valuation of

investments to be the most

significant audit area as there is a

high level of estimation uncertainty

involved in determining the

unquoted investment valuations.

,

There is also an inherent risk of

management override arising from

the unquoted investment valuations

being prepared by the Investment

Manager who is remunerated

based on factors including the net

asset value of the Company

.

For these reasons we considered

the valuation of unquoted

investments to be a key audit

matter

.

Our sample for the testing of unquoted investments was stratified according to

risk considering, inter alia, the value of individual investments, the nature of the

investment, the extent of the fair value movement and the subjectivity of the

valuation technique.

For all investments in our sample we:

y

Challenged whether the valuation methodology was the most appropriate in the

circumstances under the International Private Equity and Venture Capital Valuation

(“IPEV”) Guidelines and the applicable accounting standards. We have

recalculated the value attributable to the Compan , having regard to the application of

enterprise value across the capital structures of the investee companies.

For investments sampled that were valued using less subjective valuation

techniques (cost and price of recent investment reviewed for changes in fair

value) we:

> Verified the cost or price of recent investment to supporting documentation;

> Considered whether the investment was an arm’s length transaction through

reviewing the parties involved in the transaction and checking whether or not

they were already investors of the investee company;

> Considered whether there were any indications that the cost or price of recent

investment was no longer representative of fair value considering, inter alia,

the current performance of the investee company and the milestones and

assumptions set out in the investment proposal; and

> Considered whether the price of recent investment is supported by alternative

valuation techniques.

For investments sampled that were valued using more subjective techniques

(earnings multiples and revenue multiples) we:

> Challenged and corroborated the inputs to the valuation with reference to

management information of investee companies, market data and our own

understanding and assessed the impact of the estimation uncertainty

concerning these assumptions and the disclosure of these uncertainties in

the financial statements;

INDEPENDENT AUDITOR’S REPORT

Independent

Auditor’s Report

(continued)

British Smaller Companies VCT plc Annual Report & Accounts

55

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

Key audit matterHow the scope of our audit addressed the key audit matter

> Reviewed the historical financial statements and any recent management

information available to support assumptions about maintainable revenues,

earnings or cash flows used in the valuations;

> Considered the revenue or earnings multiples applied and the discounts

applied by reference to observable listed company market data; and

> Challenged the consistency and appropriateness of adjustments made to

such market data in establishing the revenue, cash flow or earnings multiple

applied in arriving at the valuations adopted by considering the individual

performance of investee companies against plan and relative to the peer

group, the market and sector in which the investee company operates and

other factors as appropriate.

Where appropriate, we performed a sensitivity analysis by developing our own

point estimate where we considered that alternative input assumptions could

reasonably have been applied and we considered the overall impact of such

sensitivities on the portfolio of investments in determining whether the valuations

as a whole are reasonable and free from bias.

Key observations

Based on the procedures performed we consider the investment valuations to

be appropriate considering the level of estimation uncertainty.

Our application of materiality

We apply the concept of materiality both in planning and

performing our audit, and in evaluating the effect of

misstatements. We consider materiality to be the

magnitude by which misstatements, including omissions,

could influence the economic decisions of reasonable

users that are taken on the basis of the financial

statements.

In order to reduce to an appropriately low level the

probability that any misstatements exceed materiality, we

use a lower materiality level, performance materiality, to

determine the extent of testing needed. Importantly,

misstatements below these levels will not necessarily be

evaluated as immaterial as we also take account of the

nature of identified misstatements, and the particular

circumstances of their occurrence, when evaluating their

effect on the financial statements as a whole.

56

British Smaller Companies VCT plc Annual Report & Accounts

INDEPENDENT AUDITOR’S REPORT

Independent

Auditor’s Report

(continued)

We determined that for Revenue return before tax, a

misstatement of less than materiality for the financial

statements as a whole, could influence users of the

financial statements as it is a measure of the Company’s

performance of income generated from its investments

after expenses. As a result, we determined a lower testing

threshold for those items impacting revenue return of

£290,000 (2022: £280,000) based on 10% of total

expenditure excluding the incentive fee (2022: 10% of total

expenditure excluding the incentive fee).

Reporting threshold

We agreed with the Audit & Risk Committee that we would

report to them all individual audit differences in excess of

£120,000 (2022: £100,000). We also agreed to report

differences below this threshold that, in our view,

warranted reporting on qualitative grounds.

Other information

The directors are responsible for the other information.

The other information comprises the information included

in the Annual report other than the financial statements

and our auditor’s report thereon. Our opinion on the

financial statements does not cover the other information

and, except to the extent otherwise explicitly stated in our

report, we do not express any form of assurance

conclusion thereon. Our responsibility is to read the other

information and, in doing so, consider whether the other

information is materially inconsistent with the financial

statements or our knowledge obtained in the course of the

audit, or otherwise appears to be materially misstated. If

we identify such material inconsistencies or apparent

material misstatements, we are required to determine

whether this gives rise to a material misstatement in the

financial statements themselves. If, based on the work we

have performed, we conclude that there is a material

misstatement of this other information, we are required to

report that fact.

We have nothing to report in this regard.

Corporate governance statement

The Listing Rules require us to review the directors’

statement in relation to going concern, longer-term viability

and that part of the Corporate Governance Statement

relating to the Company’s compliance with the provisions

of the UK Corporate Governance Code specified for our

review.

Based on the work undertaken as part of our audit, we

have concluded that each of the following elements of the

Corporate Governance Statement is materially consistent

with the financial statements or our knowledge obtained

during the audit.

Based on our professional judgement, we determined materiality for the financial statements as a whole and

performance materiality as follows:

Company financial statements

2023

£’000

2022

£’000

Materiality

2,500

2,000

Basis for determining materiality

2% of total investments

Rationale for the benchmark appliedIn setting materiality, we have had regard to the nature and

disposition of the investment portfolio. Given that the VCT’s

portfolio is comprised of unquoted investments which would

typically have a wider spread of reasonable alternative possible

valuations, we have applied a percentage of 2% of the

investment value.

Performance materiality1,9001,500

Basis for determining performance materiality 75% of materiality

Rationale for the percentage applied for

performance materiality

The level of performance materiality applied was set after having

considered a number of factors including the expected total value

of known and likely misstatements based on our knowledge and

experience of the audited entity.

Lower testing threshold

British Smaller Companies VCT plc Annual Report & Accounts

57

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

Going concern and

longer-term viability

>The directors’ statement with regards to the appropriateness of adopting

the going concern basis of accounting and any material uncertainties

identified; and

>The directors’ explanation as to their assessment of the Company’s

prospects, the period this assessment covers and why the period is

appropriate.

Other Code provisions

>Directors’ statement on fair, balanced and understandable;

>Board’s confirmation that it has carried out a robust assessment of the

emerging and principal risks;

>The section of the annual report that describes the review of

effectiveness of risk management and internal control systems; and

>The section describing the work of the Audit & Risk Committee.

Other Companies Act 2006 reporting

Based on the responsibilities described below and our work performed during the course of the audit, we are required

by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.

In our opinion, based on the work undertaken in the course of the audit:

Strategic report and

Directors’ report

>the information given in the Strategic Report and the Directors’ Report

for the financial year for which the financial statements are prepared is

consistent with the financial statements; and

>the Strategic Report and the Directors’ Report have been prepared in

accordance with applicable legal requirements.

In the light of the knowledge and understanding of the Company and its

environment obtained in the course of the audit, we have not identified material

misstatements in the Strategic Report or the Directors’ Report.

Directors’ remuneration

In our opinion, the part of the Directors’ Remuneration Report to be audited

has been properly prepared in accordance with the Companies Act 2006.

Matters on which we are required

to report by exception

We have nothing to report in respect of the following matters in relation to

which the Companies Act 2006 requires us to report to you if, in our opinion:

> adequate accounting records have not been kept, or returns adequate

for our audit have not been received from branches not visited by us; or

>the financial statements and the part of the Directors’ Remuneration

Report to be audited are not in agreement with the accounting records

and returns; or

>certain disclosures of directors’ remuneration specified by law are not

made; or

> we have not received all the information and explanations we require for

our audit.

58

British Smaller Companies VCT plc Annual Report & Accounts

Independent

Auditor’s Report

(continued)

INDEPENDENT AUDITOR’S REPORT

Responsibilities of Directors

As explained more fully in the Directors’ Responsibilities

Statement, the Directors are responsible for the

preparation of the financial statements and for being

satisfied that they give a true and fair view, and for such

internal control as the Directors determine is necessary to

enable the preparation of financial statements that are free

from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are

responsible for assessing the Company’s ability to

continue as a going concern, disclosing, as applicable,

matters related to going concern and using the going

concern basis of accounting unless the Directors either

intend to liquidate the Company or to cease operations,

or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the

financial statements

Our objectives are to obtain reasonable assurance about

whether the financial statements as a whole are free from

material misstatement, whether due to fraud or error, and

to issue an auditor’s report that includes our opinion.

Reasonable assurance is a high level of assurance, but is

not a guarantee that an audit conducted in accordance

with ISAs (UK) will always detect a material misstatement

when it exists. Misstatements can arise from fraud or error

and are considered material if, individually or in the

aggregate, they could reasonably be expected to influence

the economic decisions of users taken on the basis of

these financial statements.

Extent to which the audit was capable of detecting

irregularities, including fraud

Irregularities including fraud, are instances of non-

compliance with laws and regulations. We design

procedures in line with our responsibilities, outlined above,

to detect material misstatements in respect of

irregularities, including fraud. The extent to which our

procedures are capable of detecting irregularities,

including fraud is detailed below:

Non-compliance with laws and regulations

Based on:

>Our understanding of the Company and the industry

in which it operates;

>Discussion with the Manager and those charged with

governance; and

>Obtaining an understanding of the Company’s

policies and procedures regarding compliance with

laws and regulations.

We considered the significant laws and regulations to be

the Companies Act 2006, the FCA listing and DTR rules,

the principles of the UK Corporate Governance Code,

industry practice represented by the Statement of

Recommended Practice: Financial Statements of

Investment Trust Companies and Venture Capital Trusts

(“the SORP”) and updated in 2022 with consequential

amendments and the applicable financial reporting

framework. We also considered the Company’s

qualification as a VCT under UK tax legislation.

Our procedures in respect of the above included:

>Agreement of the financial statement disclosures to

underlying supporting documentation;

>Enquiries of the Manager and those charged with

governance relating to the existence of any non-

compliance with laws and regulations;

>Obtaining the VCT compliance reports prepared by

management’s expert during the year and as at year

end and reviewing their calculations for the year end

report to check that the Company was meeting its

requirements to retain VCT status; and

>Reviewing minutes of meeting of those charged with

governance throughout the period for instances of

non-compliance with laws and regulations.

Fraud

We assessed the susceptibility of the financial statement

to material misstatement including fraud.

Our risk assessment procedures included:

>Enquiry with the Manager and those charged with

governance regarding any known or suspected

instances of fraud;

>Obtaining an understanding of the Company’s

policies and procedures relating to:

-Detecting and responding to the risks of fraud;

and

-Internal controls established to mitigate risks

related to fraud.

> Review of minutes of the Board and other committee

meetings throughout the period for any known or

suspected instances of fraud;

British Smaller Companies VCT plc Annual Report & Accounts

59

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

>Discussion amongst the engagement team as to

how and where fraud might occur in the financial

statements.

Based on our risk assessment, we considered the areas

most susceptible to fraud to be the valuation of unquoted

investments and management override of controls.

Our procedures in respect of the above included:

>The procedures set out in the Key Audit Matters

section above;

>Obtaining independent evidence to support the

ownership of a sample of investments;

>Recalculating investment management fees and

incentive fees in total;

>Obtaining independent confirmation of bank

balances; and

>Reviewing journals that relate to the current year

end that were posted into the accounting system

post year end against supporting documentation, to

assess the reasonability of these journals and

assess whether those journals are not an indication

of management override of controls or an indication

of fraud.

We also communicated relevant identified laws and

regulations and potential fraud risks to all engagement

team members who were all deemed to have appropriate

competence and capabilities and remained alert to any

indications of fraud or non-compliance with laws and

regulations throughout the audit.

Our audit procedures were designed to respond to risks

of material misstatement in the financial statements,

recognising that the risk of not detecting a material

misstatement due to fraud is higher than the risk of not

detecting one resulting from error, as fraud may involve

deliberate concealment by, for example, forgery,

misrepresentations or through collusion. There are

inherent limitations in the audit procedures performed

and the further removed non-compliance with laws and

regulations is from the events and transactions reflected

in the financial statements, the less likely we are to

become aware of it.

A further description of our responsibilities is available on

theFinancialReportingCouncil’swebsiteat:

www.frc.org.uk/auditorsresponsibilities. This description

forms part of our auditor’s report.

Use of our report

This report is made solely to the Company’s members,

as a body, in accordance with Chapter 3 of Part 16 of the

Companies Act 2006. Our audit work has been

undertaken so that we might state to the Company’s

members those matters we are required to state to them

in an auditor’s report and for no other purpose. To the

fullest extent permitted by law, we do not accept or

assume responsibility to anyone other than the Company

and the Company’s members as a body, for our audit

work, for this report, or for the opinions we have formed.

Vanessa-Jayne Bradley

(Senior Statutory Auditor)

For and on behalf of

BDO LLP,

Statutory Auditor

London, UK

16 June 2023

BDO LLP is a limited liability partnership registered in England and

Wales (with registered number OC305127)

60

British Smaller Companies VCT plc Annual Report & Accounts

Revenue

Notes£000

2023

Capital Total

£000 £000

Revenue

£000

2022

Capital Total

£000 £000

Gains on investments

held at fair value

7

-

8,1528,152

-

25,51525,515

Gain on disposal

of investments

7

-

5,2135,213

-

5,1315,131

Gain arising from the

investment portfolio

-

13,36513,365

-

30,64630,646

Income

2

1,994

-1,994

1,065

-1,065

Total income

1,994

13,36515,359

1,065

30,64631,711

Administrative expenses:

Manager’s fee

(696)(2,086)

(2,782)

(577)

(1,732)

(2,309)

Incentive fee

-(125)

(125)

-

(621)

Other expenses

(215)-

(215)

(517)

-

(517)

3

(911)(2,211)

(3,122)

(1,094)

(2,353)

(3,447)

Profit (loss) before taxation

1,08311,154

12,237

(29)

28,293

28,264

Taxation

4

--

-

Profit (loss) for the year

1,08311,154

12,237

(29)

28,293

28,264

Total comprehensive income

(expense) for the year

1,08311,154

12,237

(29)

28,293

28,264

Basic and diluted earnings (loss)

per ordinary share

6

0.58p5.96p

6.54p

(0.02p)

18.24p

18.22p

The accompanying notes on pages 65 to 91 are an integral part of these financial statements.

The Total column of this statement represents the Company’s Statement of Comprehensive Income, prepared in

accordance with UK adopted international accounting standards. The supplementary Revenue and Capital columns

are prepared under the Statement of Recommended Practice ‘Financial Statements of Investment Trust Companies

and Venture Capital Trusts’ (issued in July 2022 – “SORP”) published by the AIC.

Statement of

Comprehensive Income

For the year ended 31 March 2023

FINANCIAL STATEMENTS

British Smaller Companies VCT plc Annual Report & Accounts

61

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

2023

Notes£000

2022

£000

ASSETS

Non-current assets at fair value through profit or loss

Financial assets at fair value through profit or loss

7

127,406

105,865

Accrued income and other assets

8

1,556

907

128,962

106,772

Current assets

Accrued income and other assets

8

161

150

Current asset investments

9

7,501

14,471

Cash and cash equivalents

9

20,766

38,928

28,428

53,549

LIABILITIES

Current liabilities

Trade and other payables

10

(358)

(787)

Net current assets

28,070

52,762

Net assets

157,032

159,534

Shareholders’ equity

Share capital

11

20,969

20,510

Share premium account

1,700

62,123

Capital reserve

82,893

33,620

Investment holding gains and losses reserve

7

49,215

41,982

Revenue reserve

2,255

1,299

Total shareholders’ equity

157,032

159,534

Net asset value per ordinary share

12

83.7p

85.7p

The accompanying notes on pages 65 to 91 are an integral part of these financial statements.

The financial statements were approved and authorised for issue by the Board of Directors and were signed on its

behalf on 16 June 2023.

At 31 March 2023

Balance Sheet

Rupert Cook

Chairman

62

British Smaller Companies VCT plc Annual Report & Accounts

FINANCIAL STATEMENTS

Statement of

Changes in Equity

For the year ended 31 March 2023

Share

capital

£000

Share

premium

account

£000

Capital

reserve

£000

Investment

holding gains

and losses

reserve

£000

Revenue

reserve

£000

Total

equity

£000

Balance at 31 March 2021

16,131

29,995

41,106

18,944

4,184

110,360

-

(2,353)

-

(29)

-

(29)

(2,353)

Revenue loss for the year

Expenses charged to capital

Investment holding gain on

investments held at fair value

Realisation of investments in the year

-

5,131

25,515

-

25,515

5,131

Total comprehensive

income (expense) for the year

-

2,778

25,515

(29)

28,264

Issue of share capital

Issue of shares – DRIS

Issue costs *

Purchase of own shares

Dividends

3,952

427

-

30,676

2,990

(1,538)

--

-

(2,498)

(10,303)

-

(2,796)

34,628

3,417

(1,538)

(2,498)

(13,099)

Total transactions with owners

4,379

32,128

(12,801)

-

(2,796)

20,910

Realisation of prior year

investment holding gains

-

2,537

(2,477)

(60)

-

Balance at 31 March 2022

20,510

62,123

33,620

41,982

1,299

159,534

-

(2,211)

-

1,083

-

1,083

(2,211)

Revenue return for the year

Expenses charged to capital

Investment holding gain on

investments held at fair value

Realisation of investments in the year

-

5,213

8,152

-

8,152

5,213

Total comprehensive income

for the year

-

3,002

8,152

1,083

12,237

Issue of shares – DRIS

Issue costs *

Share premium cancellation

Purchase of own shares

Dividends

459

-

3,245

(62)

(63,606)

--

-

63,606

(2,497)

(15,757)

-

(127)

3,704

(62)

-

(2,497)

(15,884)

Total transactions with owners

459

(60,423)

45,352

-

(127)

(14,739)

Realisation of prior year

investment holding gains

-

919

(919)

-

Balance at 31 March 2023

20,969

1,700

82,893

49,215

2,255

157,032

The accompanying notes on pages 65 to 91 are an integral part of these financial statements.

British Smaller Companies VCT plc Annual Report & Accounts

63

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

Capital

reserve

£000

Revenue

reserve

£000

Total

£000

Distributable reserves as shown on previous page

82,893

2,255

85,148

Income not yet distributable

-

(1,617)

Cancelled share premium not yet distributable

(40,769)

-

(40,769)

Reserves available for distribution**

42,124

638

42,762

*Issue costs include both fundraising costs and costs incurred from the Company’s DRIS.

** Following the circulation of the Annual Report to shareholders.

The capital reserve and revenue reserve are both distributable reserves. The reserves total £85,148,000, representing an

increase of £50,229,000 during the year. The directors also take into account the level of the investment holding gains

and losses reserve and the future requirements of the Company when determining the level of dividend payments.

Of the potentially distributable reserves of £85,148,000 shown above, £1,617,000 relates to income not yet distributable

and £40,769,000 relates to cancelled share premium which will become distributable from the dates shown in the table

below.

Following shareholder approval at the 2022 Annual General Meeting, in October 2022 the Company cancelled the

balance of its Share Premium, £63,606,000, of which £22,837,000 is now distributable. The remaining share premium

cancelled will be available for distribution from the following dates:

£000

1 April 20247,157

1 April 202532,128

1 April 20261,484

Cancelled share premium not yet distributable40,769

For the year ended 31 March 2023

Reserves available for distribution

Under the Companies Act 2006 the capital reserve and the revenue reserve are distributable reserves. The table below

shows amounts that are available for distribution.

Statement of

Changes in Equity

(continued)

64

British Smaller Companies VCT plc Annual Report & Accounts

FINANCIAL STATEMENTS

2023

Notes£000

2022

£000

Net cash outflow from operating activities

(2,277)

(1,483)

Cash flows generated from (used in) investing activities

Cash maturing from fixed term deposits

6,970

-

Purchase of financial assets at fair value through profit or loss

7

(28,832)

(10,465)

Proceeds from sale of financial assets at fair value through profit or loss

7

20,716

14,069

Deferred consideration

7

-

240

Net cash (outflow) inflow from investing activities

(1,146)

3,844

Cash flows from (used in) financing activities

Issue of ordinary shares

-

34,628

Costs of ordinary share issues*

(62)

(1,538)

Purchase of own ordinary shares

(2,497)

(2,498)

Dividends paid

5

(12,180)

(9,682)

Net cash (outflow) inflow from financing activities

(14,739)

20,910

Net (decrease) increase in cash and cash equivalents

(18,162)

23,271

Cash and cash equivalents at the beginning of the year

46,429

23,158

Cash and cash equivalents at the end of the year

28,267

46,429

* Issue costs include both fundraising costs and expenses incurred from the Company’s DRIS

Cash and cash equivalents comprise

Money market funds

9

7,5017,501

Cash at bank

9

20,76638,928

Cash and cash equivalents at the end of the year

28,26746,429

Reconciliation of Profit before Taxation to

Net Cash Outflow from Operating Activities

2023

£000

2022

£000

Profit before taxation

12,237

28,264

(Decrease) increase in trade and other payables

(429)

601

(Increase) decrease in accrued income and other assets

(660)

387

Gain on disposal of investments

(5,213)

(5,131)

Gains on investments held at fair value

(8,152)

(25,515)

Capitalised income

(60)

(89)

Net cash outflow from operating activities

(2,277)

(1,483)

The accompanying notes on pages 65 to 91 are an integral part of these financial statements.

Statement of

Cash Flows

For the year ended 31 March 2023

British Smaller Companies VCT plc Annual Report & Accounts

65

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

1. Principal Accounting Policies

Basis of Preparation

The accounts have been prepared on a going concern basis as set out in the Directors Report on pages 37 and

38 and in accordance with UK adopted international accounting standards.

The directors have carefully considered the issue of going concern in view of the Company’s activities and

associated risks. The Company has a well-diversified portfolio with businesses in a variety of sectors, many of

which are well funded. Some portfolio companies may require additional funding in the near- to medium-term; the

Company is well placed to provide this, where appropriate.

The Company has a significant level of liquidity, which was enhanced by the April 2023 fundraising. In addition, the

Board has control over, and can flex as appropriate, the Company’s major outgoings, which predominantly

comprise investments, dividends and share buy-backs.

The directors have also assessed whether material uncertainties exist and their potential impact on the Company’s

ability to continue as a going concern; they have concluded that no such material uncertainties exist.

Taking all of the above into consideration, the directors are satisfied that the Company has sufficient resources to

meet its obligations for at least 12 months from the date of this report and therefore believe that it is appropriate to

continue to apply the going concern basis of accounting in preparing the financial statements.

The financial statements have been prepared under the historical cost basis as modified by the measurement of

investments at fair value through profit or loss.

The accounts have been prepared in compliance with the recommendations set out in the Statement of

Recommended Practice ‘Financial Statements of Investment Trust Companies and Venture Capital Trusts’ issued

by the Association of Investment Companies (issued in July 2022 – “SORP”) to the extent that they do not conflict

with UK adopted international accounting standards.

The financial statements are prepared in accordance with UK adopted international accounting standards and

interpretations in force at the reporting date. New standards coming into force during the year and future standards

that come into effect after the year-end have not had a material impact on these financial statements.

The Company has carried out an assessment of accounting standards, amendments and interpretations that have

been issued by the IASB and that are effective for the current reporting period. The Company has determined that

the transitional effects of the standards do not have a material impact.

The financial statements are presented in sterling and all values are rounded to the nearest thousand (£000),

except where stated.

Financial Assets held at Fair Value through Profit or Loss - Investments

Financial assets designated as at fair value through profit or loss (“FVPL”) at inception are those that are managed

and whose performance is evaluated on a fair value basis, in accordance with the documented investment strategy of

the Company. Information about these financial assets is provided internally on a fair value basis to the

Company’s key management. The Company’s investment strategy is to invest cash resources in venture capital

investments as part of the Company’s long-term capital growth strategy. Consequently, all investments are

classified as held at fair value through profit or loss.

All investments are measured at fair value on the whole unit of account basis with gains and losses arising from

changes in fair value being included in the Statement of Comprehensive Income as gains or losses on investments

held at fair value.

Transaction costs on purchases are expensed immediately through profit or loss.

Although the Company holds more than 20 per cent of the equity of certain companies, it is considered that the

investments are held as part of the investment portfolio, and their value to the Company lies in their marketable

value as part of that portfolio. These investments are therefore not accounted for using equity accounting, as

Notes to the

Financial Statements

66

British Smaller Companies VCT plc Annual Report & Accounts

FINANCIAL STATEMENTS

1.Principal Accounting Policies (continued)

permitted by IAS 28 ‘Investments in associates’ and IFRS 11 ‘Joint arrangements’ which give exemptions from

equity accounting for venture capital organisations.

Under IFRS 10 “Consolidated Financial Statements”, control is presumed to exist when the Company has power

over an investee (whether or not used in practice); exposure or rights; to variable returns from that investee, and

ability to use that power to affect the reporting entities returns from the investees. The Company does not hold

more than 50 per cent of the equity of any of the companies within the portfolio. The Company does not control any

of the companies held as part of the investment portfolio. It is not considered that any of the holdings represent

investments in subsidiary undertakings.

Valuation of Investments

Unquoted investments are valued in accordance with IFRS 13 “Fair Value Measurement” and using the

International Private Equity and Venture Capital Valuation Guidelines (“the IPEV Guidelines”) updated in December

2022. Quoted investments are valued at market bid prices. A detailed explanation of the valuation policies of the

Company is included below.

Initial Measurement

The best estimate of the initial fair value of an unquoted investment is the cost of the investment. Unless there are

indications that this is inappropriate, an unquoted investment will be held at this value within the first three months of

investment.

Subsequent Measurement

Based on the IPEV Guidelines we have identified six of the most widely used valuation methodologies for unquoted

investments. The Guidelines advocate that the best valuation methodologies are those that draw on external,

objective market-based data in order to derive a fair value.

Unquoted Investments

>Revenue multiples. An appropriate multiple, given the risk profile and revenue growth prospects of the

underlying company, is applied to the revenue of the company. The multiple is adjusted to reflect any risk

associated with lack of marketability and to take account of the differences between the investee company

and the benchmark company or companies used to derive the multiple.

> Earnings multiple. An appropriate multiple, given the risk profile and earnings growth prospects of the

underlying company, is applied to the maintainable earnings of the company. The multiple is adjusted to

reflect any risk associated with lack of marketability and to take account of the differences between the

investee company and the benchmark company or companies used to derive the multiple.

> Net assets. The value of the business is derived by using appropriate measures to value the assets and

liabilities of the investee company.

>Discounted cash flows of the underlying business. The present value of the underlying business is

derived by using reasonable assumptions and estimations of expected future cash flows and the terminal

value, and discounted by applying the appropriate risk-adjusted rate that quantifies the risk inherent in the

company.

> Discounted cash flows from the investment. Under this method, the discounted cash flow concept is

applied to the expected cash flows from the investment itself rather than the underlying business as a whole.

> Price of recent investment. This may represent the most appropriate basis where a significant amount of

new investment has been made by an independent third party. This is adjusted, if necessary, for factors

relevant to the background of the specific investment such as preference rights and will be benchmarked

against other valuation techniques. In line with the IPEV Guidelines the price of recent investment will usually

only be used for the initial period following the round and after this an alternative basis will be found.

Notes to the

Financial Statements

(continued)

British Smaller Companies VCT plc Annual Report & Accounts

67

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

Due to the significant subjectivity involved, discounted cash flows are only likely to be reliable as the main basis of

estimating fair value in limited situations. Their main use is to support valuations derived using other

methodologies and for assessing reductions in fair value.

One of the valuation methods described above is used to derive the gross attributable enterprise value of the

company after which adjustments are then made to reflect specific circumstances, such as the impact of the

coronavirus pandemic. This value is then apportioned appropriately to reflect the respective debt and equity

instruments in the event of a sale at that level at the reporting date.

Listed Investment Funds

Listed investment funds are valued at active market bid price. An active market is defined as one where

transactions take place regularly with sufficient volume and frequency to determine price on an ongoing basis. No

methodology other than active market bid price has been applied as at 31 March 2023.

Income

Dividends and interest are received from financial assets measured at fair value through profit and loss and are

recognised on the same basis in the Statement of Comprehensive Income. This includes interest and preference

dividends rolled up and/or payable at redemption. Interest income is also received on cash, cash equivalents and

current asset investments. Dividend income from unquoted equity shares is recognised at the time when the right to

the income is established.

Expenses

Expenses are accounted for on an accruals basis. Expenses are charged through the Revenue column of the

Statement of Comprehensive Income, except for the Manager’s fee and incentive fees. Of the Manager’s fees 75

per cent are allocated to the Capital column of the Statement of Comprehensive Income, to the extent that these

relate to an enhancement in the value of the investments and in line with the Board’s expectation that over the

long term 75 per cent of the Company’s investment returns will be in the form of capital gains. The incentive fee

payable to the Manager (as set out in note 3) is charged wholly through the Capital column.

Tax relief is allocated to the Capital Reserve using a marginal basis.

Incentive Fee

The incentive fee is accounted for on an accruals basis. As further detailed in note 3, a performance incentive fee is

payable to the Manager subject to the Company achieving both a target level of Total Return (the “Total Return

Hurdle”) and dividends (“Dividend Hurdle”). Subject to meeting the Total Return Hurdle, the Manager will receive an

amount equivalent to 20 per cent of the amount by which dividends paid per share exceeds the Dividend Hurdle,

multiplied by the number of shares in issue at the year end. The incentive fee in any financial year will be subject to a

cap if the excess of dividends paid over the Dividend Hurdle is greater than the sum of the excess of the Total

Return over the Total Return Hurdle divided by 1.2. At the end of each reporting period, an accrual is recognised

based upon the dividends paid during the financial year to date and the Total Return at the end of the reporting

period. The incentive fee is charged wholly through the Capital column.

Cash, Cash Equivalents and Current Asset Investments

Cash at bank comprises cash at hand and bank deposits with an original maturity of less than three months,

readily convertible to a known amount of cash and subject to an insignificant risk of changes in value.

Current asset investments comprise money market funds and balances held in fixed term deposits which mature

after three months.

68

British Smaller Companies VCT plc Annual Report & Accounts

FINANCIAL STATEMENTS

1.Principal Accounting Policies (continued)

Cash and cash equivalents include cash at hand, money market funds and bank deposits repayable on up to

three months’ notice as these meet the definition in IAS 7 ‘Statement of cash flows’ of a short-term highly liquid

investment that is readily convertible into known amounts of cash and subject to insignificant risk of change in

value.

Balances held in fixed term deposits which mature after three months are not classified as cash and cash

equivalents, as they do not meet the definition in IAS 7 ‘Statement of cash flows’ of short-term highly liquid

investments.

Cash and cash equivalents are valued at amortised cost, which equates to fair value.

Cash flows classified as “operating activities” for the purposes of the Statement of Cash Flows are those arising

from the Revenue column of the Statement of Comprehensive Income, together with the items in the Capital

column that do not fall to be easily classified under the headings for “investing activities” given by IAS 7 ‘Statement of

cash flows’, being management and incentive fees payable to the Manager. The capital cash flows relating to the

acquisition and disposal of investments are presented under “investing activities” in the Statement of Cash Flows

in line with both the requirements of IAS 7 and the positioning given to these headings by general practice in the

industry.

Share Capital and Reserves

Share Capital

This reserve contains the nominal value of all shares allotted under offers for subscription.

Share Premium Account

This reserve contains the excess of gross proceeds less issue costs over the nominal value of shares allotted

under offers for subscription, to the extent that it has not been cancelled.

Capital Reserve

The following are included within this reserve:

>Gains and losses on realisation of investments;

>Realised losses upon permanent diminution in value of investments;

>Capital income from investments;

>75 per cent of the Manager’s fee expense, together with the related taxation effect to this reserve in

accordance with the policy on expenses in note 1 of the financial statements;

>Incentive fee payable to the Manager;

>Capital dividends paid to shareholders;

>Applicable share issue costs;

>Purchase and holding of the Company’s own shares; and

>Credits arising from the cancellation of any share premium account.

Investment Holding Gains and Losses Reserve

Increases and decreases in the valuation of investments held at the year end are accounted for in this reserve,

except to the extent that the diminution is deemed permanent.

Revenue Reserve

This reserve includes all revenue income from investments along with any costs associated with the running of

the Company – less 75 per cent of the Manager’s fee expense as detailed in the Capital Reserve above.

Notes to the

Financial Statements

(continued)

British Smaller Companies VCT plc Annual Report & Accounts

69

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

Taxation

Due to the Company’s status as a venture capital trust and the continued intention to meet the conditions required to

comply with Chapter 3 Part 6 of the Income Tax Act 2007, no provision for taxation is required in respect of any

realised or unrealised appreciation of the Company’s investments which arises. Deferred tax is recognised on all

temporary differences that have originated, but not reversed, by the balance sheet date.

Deferred tax assets are only recognised to the extent that they are regarded as recoverable. Deferred tax is

calculated at the tax rates that are expected to apply when the asset is realised. Deferred tax assets and liabilities are

not discounted.

Dividends Payable

Dividends payable are recognised only when an obligation exists. Interim and special dividends are recognised

when paid and final dividends are recognised when approved by shareholders in general meetings.

Segmental Reporting

In accordance with IFRS 8 ‘Operating segments’ and the criteria for aggregating reportable segments, segmental

reporting has been determined by the directors based upon the reports reviewed by the Board. The directors are of

the opinion that the Company has engaged in a single operating segment - investing in equity and debt securities

within the United Kingdom - and therefore no reportable segmental analysis is provided.

Critical Accounting Estimates and Judgements

The preparation of financial statements in conformity with generally accepted accounting practice requires the

use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the

financial statements and the reported amounts of revenues and expenses during the reporting period. Although

these estimates are based on management’s best knowledge of the amount, event or actions, actual results may

ultimately differ from those estimates. The estimates and assumptions that have a significant risk of causing a

material adjustment to the carrying amounts of assets and liabilities within the next financial year are those used to

determine the fair value of investments at fair value through profit or loss, as disclosed in note 7 to the financial

statements.

The fair value of investments at fair value through profit or loss is determined by using valuation techniques. As

explained above, the Board uses its judgement to select from a variety of methods and makes assumptions that are

mainly based on market conditions at each balance sheet date.

The Board uses its judgement to select the appropriate method for determining the fair value of investments

through profit or loss.

70

British Smaller Companies VCT plc Annual Report & Accounts

FINANCIAL STATEMENTS

2.Income

2023 2022

£000 £000

Dividends from unquoted companies

1,102504

Interest on loans to unquoted companies

263359

Income from unquoted portfolio

1,365863

Income from listed investment funds

300129

Income from investments held at fair value through profit or loss

1,665992

Interest from bank deposits/money market funds

32973

1,9941,065

3.Administrative Expenses

2023 2022

£000 £000

Manager’s fee

2,7822,309

Administration fee

7569

Total payable to YFM Private Equity Limited

2,8572,378

Incentive fee

125621

Other expenses:

General expenses

14990

Directors’ remuneration

141124

Listing and registrar fees

8058

Auditor’s remuneration - audit of the financial statements

(excluding irrecoverable VAT)

6443

Trail commission paid to financial intermediaries

9260

Printing

5141

Irrecoverable VAT

4632

3,6053,447

Fair value movement related to credit risk

(483)-

3,1223,447

Ongoing charges figure

2.12%2.02%

Notes to the

Financial Statements

(continued)

British Smaller Companies VCT plc Annual Report & Accounts

71

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

Directors’ remuneration comprises only short-term benefits including social security contributions of £13,000 (2022:

£9,000).

The directors are the Company’s only key management personnel.

No fees are payable to the auditor in respect of other services (2022: £nil, apart from costs of £12,000 for audit-

related assurance services which were charged to the share premium account).

YFM Private Equity Limited provides management services to the Company under an agreement (IA) dated 28

February 1996 as varied by agreements dated 1 July 2009, 16 November 2012, 17 October 2014, 24 August

2015 and 18 November 2019. The agreement may be terminated by not less than 12 months’ notice given by

either party at any time. No notice has been issued to or by YFM Private Equity Limited terminating the contract as

at the date of this Report.

The key features of the IA are:

>YFM Private Equity Limited receives a Manager’s fee, calculated at half-yearly intervals as at 31 March and 30

September, at the rate of 2.0 per cent of gross assets less current liabilities. The fee is allocated between

capital and revenue as described in note 1. The fee is payable quarterly in advance;

>With effect from 1 April 2019 the annual fee payable to the Manager is 1.0 per cent on all surplus cash,

defined as all cash above £7.5 million. The annual fee on all other assets will be 2.0 per cent of net assets

per annum. Based on the Company’s net assets at 31 March 2023 of £157,032,000 and cash and cash

equivalents of £28,267,000 at that date, this equates to approximately £2,933,000 per annum;

>Under the IA YFM Private Equity Limited also provides administrative and secretarial services to the

Company for a fee of £35,000 per annum (at 28 February 1996) plus annual adjustments to reflect

movements in the Retail Prices Index. This fee is charged fully to revenue, and totalled £75,000 for the year

ended 31 March 2023 (2022: £69,000); and

>YFM Private Equity Limited shall bear the annual operating costs of the Company (including the fees set out

above but excluding any payment of the performance incentive fee, details of which are set out below and

excluding VAT and trail commissions payable to financial intermediaries) to the extent that those costs exceed

2.9 per cent of the net asset value of the Company. The excess expenses during the year payable to the

Company from YFM Private Equity Limited amounted to £nil (2022: £nil).

When the Company makes investments into its unquoted portfolio the Manager charges that investee an advisory

fee or arrangement fee, calculated by applying a percentage to the investment amount. The Company and the

Manager have agreed that, if the average of the relevant fees during the Company’s financial year exceeds 3.0 per

cent of the total invested into new portfolio companies and 2.0 per cent into follow-on holdings this excess will be

rebated to the Company. As at 31 March 2023, the Company was due a rebate from the Manager of £1,320 (2022:

£nil).

The total remuneration payable to YFM Private Equity Limited under the IA in the period was £2,857,000 (2022:

£2,378,000).

Monitoring and directors’ fees the Manager receives from the investee companies are limited to a maximum of

£40,000 (excluding VAT) per annum per company.

Under the IA, YFM Private Equity Limited is entitled to receive fees from investee companies in respect of the

provision of non-executive directors and other advisory services. YFM Private Equity Limited is responsible for

paying the due diligence and other costs incurred in connection with proposed investments which for whatever

reason do not proceed to completion. In the year ended 31 March 2023 the fees receivable by YFM Private Equity

Limited from investee companies which were attributable to advisory and directors’ and monitoring fees amounted to

£1,355,000 (2022: £729,000).

72

British Smaller Companies VCT plc Annual Report & Accounts

FINANCIAL STATEMENTS

Notes to the

Financial Statements

(continued)

3.Administrative Expenses (continued)

A performance incentive fee is payable to the Manager subject to the Company achieving both a target level of

Total Return (the “Total Return Hurdle”) and dividends (“Dividend Hurdle”). Subject to meeting the Total Return

Hurdle, the Manager will receive an amount equivalent to 20 per cent of the amount by which dividends paid per

share exceeds the Dividend Hurdle, multiplied by the number of shares in issue at the year end. The incentive fee

in any financial year will be subject to a cap if the excess of dividends paid over the Dividend Hurdle is greater than

the sum of the excess of the Total Return over the Total Return Hurdle divided by 1.2. With effect from 31 March

2019 the Total Return Hurdle was 228.6 pence per share and the annual increase is equivalent to 4.0 pence per

share, as increased or decreased by the percentage increase or decrease (if any) in RPI from 1 April 2009. For the

year ended 31 March 2023 the annual increase in the Total Return Hurdle was 6.1 pence per share.

The Dividend Hurdle was 4.0 pence per share (increasing in line with RPI) from 1 April 2009. For the year ended

31 March 2023 the Dividend Hurdle was 6.1 pence per share.

The incentive fees payable for the years ended 31 March 2022 and 31 March 2023 were calculated as follows:

2023

2022

Total Return Hurdle (p)

258.20

250.40

Actual Total Return per Share before incentive fee (p)

258.60

252.40

Excess over Total Return Hurdle (p)

0.40

2.00

Dividend Hurdle (p)

6.10

5.60

Actual Dividends per share (p)

8.50

9.00

Excess over Dividend Hurdle (p)

2.40

3.40

Lower excess of the two hurdles (p)

0.40

2.00

Fee impact reduction (divide by 1.2) (p)

0.333

1.667

Performance fee per share at 20% of adjusted excess (p)

0.067

0.333

Number of shares in issue (‘000)

187,679

186,260

Incentive fee payable (£’000)

125

621

The Total Return Hurdle for the year ending 31 March 2024 is 265.5 pence per share. The Dividend Hurdle is 7.0

pence per share.

If the annual incentive fee exceeds £5.0 million then the excess is deferred until following the next year’sAnnual

General Meeting. Payment of the remainder is made five Business Days after the relevant Annual General Meeting at

which the audited accounts are presented to shareholders.

The amount of the incentive payment paid to the Manager for any one year shall, when taken with all other relevant

costs, ensure that the Company’s total costs in a single year do not exceed 5 per cent of net assets. Any excess

over the 5 per cent is carried forward to be included in the calculation of the amount that can be paid in future years.

Except with shareholder approval the maximum fee payable in any 12 month period will not exceed £7.5 million.

There are also provisions for a compensatory fee in circumstances where the Company is taken over or the

Incentive Agreement is terminated, which is calculated as a percentage of the fee that would otherwise be payable

under the Incentive Agreement by reference to the accounting period following its termination. In this instance 80

per cent is payable in the first accounting period after such an event, 55 per cent in the second, 35 per cent in the

third and nothing is payable thereafter.

British Smaller Companies VCT plc Annual Report & Accounts

73

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

Under the terms of the offer launched with British Smaller Companies VCT2 plc on 22 September 2021, YFM

Private Equity Limited was entitled to 3.0 per cent of gross subscriptions, (3.5 per cent for Applications received

from Applicants who did not invest their money through a financial intermediary advisor and invested directly into

the Company) less commissions payable to an execution-only broker or platform. The net amount paid to YFM

Private Equity Limited under this offer amounted to £1,019,000.

Under the terms of the offer launched with British Smaller Companies VCT2 plc on 30 November 2022, YFM

Private Equity Limited was entitled to 3.0 per cent of gross subscriptions, (3.5 per cent for Applications received

from Applicants who did not invest their money through a financial intermediary advisor and invested directly into

the Company) less commissions payable to an execution-only broker or platform. The net amount paid to YFM

Private Equity Limited under this offer amounted to £1,383,000.

The details of directors’ remuneration are set out in the Directors’ Remuneration Report on page 50 under the

heading “Directors’ Remuneration for the year ended 31 March 2023 (audited)”.

4.Taxation

Revenue

£000

2023

Capital

£000

Total

£000

Revenue

£000

2022

Capital

£000

Total

£000

Profit (loss) before taxation

1,083

11,154

12,237

(29)

28,293

28,264

Profit (loss) before taxation multiplied

by standard rate of corporation

tax in UK of 19% (2022: 19%)

206

2,119

2,325

(6)

5,376

5,370

Effect of:

UK dividends received

(297)

-

(297)

(103)

-

(103)

Non-taxable profits on investments

-

(2,539)

-

(5,823)

Deferred tax not recognised

91

420

511

109

447

556

Tax charge

-

The Company has no provided or unprovided deferred tax liability in either year.

Deferred tax assets of £4,754,000 (2022: £4,077,000) calculated at 25% (2022: 25%) in respect of unrelieved

management expenses (£19.01 million as at 31 March 2023 and £16.31 million as at 31 March 2022) have not

been recognised as the directors do not currently believe that it is probable that sufficient taxable profits will be

available against which assets can be recovered.

Due to the Company’s status as a venture capital trust and the continued intention to meet with the conditions

required to comply with Section 274 of the Income Tax Act 2007, the Company has not provided for deferred tax on

any capital gains or losses arising on the revaluation or realisation of investments.

5.Dividends

Amounts recognised as distributions to equity holders in the period to 31 March:

Revenue

£000

2023

Capital

£000

Total

£000

Revenue

£000

2022

Capital

£000

Total

£000

Interim dividend for the year ended

31 March 2023 of 2.0p (2022: 2.0)

per ordinary share

-

3,725

2,796

116

2,912

Second interim dividend for the year

ended 31 March 2023 of 2.0p

(2022: 5.0p) per ordinary share

-

3,736

-

7,244

Third interim dividend for the year

ended 31 March 2023 of 4.5p

(2022: 2.0p) per ordinary share

127

8,296

8,423

-

2,943

127

15,757

15,884

2,796

10,303

13,099

Shares allotted under DRIS

(3,704)

(3,417)

Dividends paid in

Statement of Cash Flows

12,180

9,682

The first interim dividend of 2.0 pence per ordinary share was paid on 12 July 2022 to shareholders on the register

as at 10 June 2022.

The second interim dividend of 2.0 pence per ordinary share was paid on 3 October 2022 to shareholders on the

register as at 2 September 2022.

The third interim dividend of 4.5 pence per ordinary share was paid on 11 January 2023 to shareholders on the

register as at 18 November 2022.

An interim dividend of 2.0 pence per ordinary share, in respect of the year ending 31 March 2024, will be paid on 28

July 2023 to shareholders on the register on 30 June 2023. This dividend was not recognised in the year ended 31

March 2023 as the obligation did not exist at the balance sheet date.

74

British Smaller Companies VCT plc Annual Report & Accounts

FINANCIAL STATEMENTS

Notes to the

Financial Statements

(continued)

British Smaller Companies VCT plc Annual Report & Accounts

75

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

6.Basic and Diluted (Loss) Earnings per Ordinary Share

The basic and diluted earnings per ordinary share is based on the profit after tax attributable to shareholders of

£12,237,000 (2022: £28,264,000) and 187,113,203 (2022: 155,125,398) ordinary shares being the weighted

average number of ordinary shares in issue during the year.

The basic and diluted revenue earnings (loss) per ordinary share is based on the revenue profit for the year

attributable to shareholders of £1,083,000 (2022: loss of £29,000) and 187,113,203 (2022: 155,125,398) ordinary

shares being the weighted average number of ordinary shares in issue during the year.

The basic and diluted capital earnings per ordinary share is based on the capital profit for the year attributable to

shareholders of £11,154,000 (2022: £28,293,000) and 187,113,203 (2022: 155,125,398) ordinary shares being

the weighted average number of ordinary shares in issue during the year.

During the year the Company allotted 4,591,917 new ordinary shares in respect of its DRIS.

The Company has also repurchased 3,172,783 of its own shares in the year, and these shares are held in the

capital reserve. The total of 20,007,765 treasury shares has been excluded in calculating the weighted average

number of ordinary shares for the period. The Company has no securities that would have a dilutive effect and

hence basic and diluted earnings per ordinary share are the same.

The Company has no potentially dilutive shares and consequently, basic and diluted earnings per ordinary share

are equivalent in both the year ended 31 March 2023 and 31 March 2022.

7.Financial Assets at Fair Value through Profit or Loss – Investments

IFRS 13, in respect of financial instruments that are measured in the balance sheet at fair value, requires disclosure

of fair value measurements by level of the following fair value measurement hierarchy:

Level 1: quoted prices in active markets for identical assets or liabilities. The fair value of financial instruments

traded in active markets is based on quoted market prices at the balance sheet date. An active market is defined as

a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide

pricing information on an ongoing basis. The quoted market price used for financial assets held by the Company is

the current bid price. These instruments are included in level 1 and comprise fixed income securities classified as

held at fair value through profit or loss.

Level 2: the fair value of financial instruments that are not traded in an active market is determined by using

valuation techniques. These valuation techniques maximise the use of observable market data where it is available

and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are

observable, the instrument is included in level 2. The Company held no such instruments in the current or prior

year.

Level 3: the fair value of financial instruments that are not traded in an active market (for example, investments in

unquoted companies) is determined by using valuation techniques such as revenue and earnings multiples. If one

or more of the significant inputs is not based on observable market data, the instrument is included in level 3. The

majority of the Company’s investments fall into this category at 31 March 2023.

Each investment is reviewed at least quarterly to ensure that it has not ceased to meet the criteria of the level in

which it is included at the beginning of each accounting period. The change in fair value for the current and previous

year is recognised through profit or loss.

There have been no transfers between these classifications in either period.

All items held at fair value through profit or loss were designated as such upon initial recognition.

7.Financial Assets at Fair Value through Profit or Loss – Investments (continued)

Valuation of Investments

Full details of the methods used by the Company are set out in note 1 of these financial statements. Where

investments are held in listed investment funds, fair value is set at the market bid price.

Movements in investments at fair value through profit or loss during the year to 31 March 2023 are summarised

as follows:

IFRS 13 measurement classification

Level 3

Level 1

Unquoted

Investments

£000

Listed

Investment

Funds

£000

Total

Investments

£000

Opening cost

59,265

4,618

63,883

Opening investment holding gain

41,894

88

41,982

Opening fair value at 1 April 2022

101,159

4,706

105,865

Additions at cost

28,326

506

28,832

Capitalised income

60

-

60

Disposal proceeds

(20,365)

(351)

(20,716)

Net profit (loss) on disposal

5,273

(60)

5,213

Change in fair value

7,098

(756)

6,342

Foreign exchange gain

1,810

-

1,810

Closing fair value at 31 March 2023

123,361

4,045

127,406

Closing cost

73,515

4,676

78,191

Closing investment holding gain (loss)

49,846

(631)

49,215

Closing fair value at 31 March 2023

123,361

4,045

127,406

There were no individual reductions in fair value during the year that exceeded 5 per cent of the total assets of the

Company (2022: £nil).

Level 3 valuations include assumptions based on non-observable market data, such as discounts applied either to

reflect changes in fair value of financial assets held at the price of recent investment, or to adjust revenue and

earnings multiples. IFRS 13 requires an entity to disclose quantitative information about the significant

unobservable inputs used. Of the Company’s level 3 investments, 79 per cent are held on a revenue multiple

basis and 13 per cent on an earnings multiple basis, which have significant judgement applied to the valuation

inputs. The table on page 77 sets out the range of Revenue Multiple (RM), Earnings Multiple (EM), and discounts

applied in arriving at investments valued on these bases. The remaining 8 per cent are valued based on cost or

price of recent investment, reviewed for change in fair value (4 per cent), net asset value reviewed for change in fair

value (2 per cent) and expected sale proceeds (2 per cent).

76

British Smaller Companies VCT plc Annual Report & Accounts

FINANCIAL STATEMENTS

Notes to the

Financial Statements

(continued)

British Smaller Companies VCT plc Annual Report & Accounts

77

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

Application

Revenue Multiple inputsSoftware

Cloud &

DevOpsData

NewRetail &

MediaBrands

Tech-enabled

Services

2023 Revenue Multiple Range4.73-6.592.52-6.30 4.73-11.28 1.26-6.590.97-1.411.90-6.59

Revenue Multiple

Weighted Average

6.265.76

10.21

3.561.22

5.39

2022 Revenue Multiple Range

7.10-8.904.60

4.60-20.90

8.00-8.900.97

6.80-8.80

Revenue Multiple

Weighted Average

8.304.60

16.57

8.550.97

7.31

2023 Combined RM and/or

Marketability Discount

Range24%-56%36%-65% 0%-56%28%-52%24%-56% 36%-68%

Combined RM and/or

Marketability Discount

Weighted Average

48%44%

9%

38%42%

44%

2022 Combined RM and/or

Marketability Discount

Range

52%-76%60%

10%-72%

28%-60%24%

52%-56%

Combined RM and/or

Marketability Discount

Weighted Average

58%60%

22%

47%24%

53%

BusinessNew

Earnings Multiple inputsServicesMedia

Retail &

Brands

Tech-enabled

Services

2023 Earnings Multiple Range

6.15-8.406.74

n/a15.54

Earnings Multiple

Weighted Average

7.526.74

n/a15.54

2022 Earnings Multiple Range

6.88-12.73 n/a

10.3213.34-15.10

Earnings Multiple

Weighted Average

9.20n/a

10.3214.30

2023 Combined EM and

Marketability Discount

Range

20%-48% 36%

n/a56%

Combined EM and

Marketability Discount

Weighted Average

33%36%

n/a56%

2022 Combined EM and

Marketability Discount

Range

20%-52% n/a

32%44%-60%

Combined EM and

Marketability Discount

Weighted Average

39%n/a

32%51%

7.Financial Assets at Fair Value through Profit or Loss – Investments (continued)

The standard also requires disclosure, by class of financial instruments, if the effect of changing one or more

inputs to reasonably possible alternative assumptions would result in a significant change to the fair value

measurement. Each unquoted portfolio company has been reviewed in order to identify the sensitivity of the

valuation methodology to using alternative assumptions. Where discounts have been applied (for example to

revenue/earnings levels or multiple ratios) alternatives have been considered which still fall within the IPEV

Guidelines (see page 66). For each unquoted investment, two scenarios have been modelled: more prudent

assumptions (downside case) and more optimistic assumptions (upside case). Applying the downside alternative,

the value of the unquoted investments would be £4.7 million or 3.8 per cent lower. Using the upside alternative, the

value would be increased by £4.8 million or 3.9 per cent.

Movements in investments at fair value through profit or loss during the previous year to 31 March 2022 are

summarised as follows:

IFRS 13 measurement classification

Level 3

Level 1

Unquoted

Investments

£000

Listed

Investment

Funds

£000

Total

Investments

£000

Opening cost

54,954

4,845

59,799

Opening investment holding gain (loss)

18,951

(7)

18,944

Opening fair value at 1 April 2021

73,905

4,838

78,743

Additions at cost

9,651

814

10,465

Capitalised income

89

-

89

Disposal proceeds

(13,005)

(1,064)

(14,069)

Net profit on disposal*

5,112

10

5,122

Change in fair value

24,648

108

24,756

Foreign exchange gain

759

-

759

Closing fair value at 31 March 2022

101,159

4,706

105,865

Closing cost

59,265

4,618

63,883

Closing investment holding gain

41,894

88

41,982

Closing fair value at 31 March 2022

101,159

4,706

105,865

* The net profit on disposal in the table above is £5,122,000 whereas that shown in the Statement of

Comprehensive Income is £5,131,000. The difference comprises the change in the value of deferred proceeds

totalling £9,000 in respect of assets which have been disposed of and are not included within the investment

portfolio at 1 April 2021.

78

British Smaller Companies VCT plc Annual Report & Accounts

FINANCIAL STATEMENTS

Notes to the

Financial Statements

(continued)

British Smaller Companies VCT plc Annual Report & Accounts

79

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

The following disposals took place in the year:

Net proceeds

from sale

£000

Opening

carrying

value as at

Cost 1 April 2022

£000 £000

Profit (loss)

on disposal

£000

Unquoted investments:

Springboard Research Holdings Limited

8,673

2,8226,638

2,035

Intelligent Office UK (IO Outsourcing Limited t/a Intelligent Office)6,1192,934

5,0511,068

Vuealta Group Limited*4,6012,954

3,1631,438

Wakefield Acoustics (via Malvar Engineering Limited)9721,080

-972

Arraco Global Markets Limited*-2,670

240(240)

Seven Technologies Holdings Limited-1,677

--

Total from portfolio

20,36514,13715,0925,273

Listed investment funds

351447411(60)

Total from investment portfolio

20,71614,58415,5035,213

* opening carrying value includes further investments made during the year.

7.Financial Assets at Fair Value through Profit or Loss – Investments (continued)

The following disposals took place in the year to 31 March 2022:

Net proceeds

from sale

£000

Opening

carrying

value as at

Cost 1 April 2021

£000 £000

Profit

(loss)

on disposal

£000

Unquoted investments:

Matillion Limited

4,967

2692,349

2,618

Deep-Secure Ltd

6,560

1,0004,121

2,439

KeTech Enterprises Limited

1,275

1,4901,292

(17)

Ncam Technologies Limited

131

131131

-

Harris Hill Holdings Limited

72

439-

72

Friska Limited

-

2,100-

-

Total from unquoted investments

13,005

5,4297,893

5,112

Deferred proceeds:

Bagel Nash Group Limited

150

-150

-

Ness (Holdings) Limited

90

-81

9

Deferred proceeds received

240

-231

9

Total from portfolio

13,245

5,4298,124

5,121

Listed investment funds

1,064

1,0411,054

10

Total from investment portfolio

14,309

6,4709,178

5,131

80

British Smaller Companies VCT plc Annual Report & Accounts

FINANCIAL STATEMENTS

Notes to the

Financial Statements

(continued)

British Smaller Companies VCT plc Annual Report & Accounts

81

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

Significant Interests

YFM Private Equity Limited, the Company’s Manager, also acts as manager to certain other funds that have

invested in some of the companies within the current portfolio of the Company. Details of these investments are

summarised in the tables below.

At 31 March 2023 the Company held a significant holding of at least 20 per cent of the issued ordinary share

capital, either individually or alongside commonly managed funds, in the following companies:

Company

Principal activity

No of shares

held by the

Company

Percentage

of class held

by the

Company*

Percentage

of class held

by commonly

managed

funds*

ACC Aviation Group Limited**

Arcus Global Limited**

AutomatePro Limited

Displayplan Holdings Limited**

EL Support Services Limited**

Elucidat Ltd

Force24 Ltd

Business Services

Application Software

Cloud & DevOps

Business Services

Investment Company

Application Software

Tech-enabled Services

Business Services

Investment Company

New Media

Investment Company

New Media

Data

Cloud & DevOps

Investment Company

Data

220,000

456,684

63,848

2,340

3,500

5,739

35,678

128,333

150,000

3,500

1,780,373

3,500

5,943,778

34,068

410,927

3,500

39,514

28%

21%

11%

22%

50%

15%

20%

16%

18%

50%

22%

50%

17%

15%

13%

50%

20%

69%

37%

25%

34%

100%

25%

40%

47%

30%

100%

51%

100%

35%

29%

100%

40%

KeTech Enterprises Limited

Macro Art Holdings Limited

NB Technology Services Limited**

Ncam Technologies Limited**

OC Engineering Services Limited**

Outpost VFX Limited

Panintelligence (via Paninsight Limited)

Quality Clouds Limited

SH Healthcare Services Limited**

SharpCloud Software Limited

Sipsynergy (via Hosted Network

Services Limited)**

SP Manufacturing Services Limited**

Tonkotsu Limited

Traveltek Group Holdings Limited

Unbiased EC1 Limited

Vuealta Holdings Limited**

Vypr Validation Technologies Limited

Wooshii Limited

Cloud & DevOps

Investment Company

Retail & Brands

Application Software

Tech-enabled Services

New Media

7,316,668

3,500

50,493

41,420

1,547,601

90,884

19,854

1,458,310

24%

50%

18%

17%

19%

28%

19%

20%

62%

100%

38%

47%

35%

51%

32%

38%

* Fully diluted holding.

** The registered office of these significant holdings is given on the inside back cover.

7.Financial Assets at Fair Value through Profit or Loss – Investments (continued)

The amounts shown below are the net cost of investments as at 31 March 2023 and exclude those companies

which are in receivership or liquidation.

British Smaller

Companies

VCT plc

£000

British Smaller

Companies

VCT2 plc

£000

Other commonly

managed

funds Total

£000 £000

ACC Aviation Group Limited

Arcus Global Limited

AutomatePro Limited

Biorelate Limited

Biz2Mobile Limited

Displayplan Holdings Limited

DrDoctor (via ICNH Ltd)

e2E Engineering Limited

Eikon Holdco Limited

EL Support Services Limited

Elucidat Ltd

Force24 Ltd

Frescobol Carioca Ltd

Intamac Systems Limited

KeTech Enterprises Limited

Macro Art Holdings Limited

Matillion Limited

NB Technology Services Limited

Ncam Technologies Limited

OC Engineering Services Limited

Outpost VFX Limited

Panintelligence (via Paninsight Limited)

Plandek Limited

Quality Clouds Limited

Relative Insight Limited

SH Healthcare Services Limited

SharpCloud Software Limited

SP Manufacturing Services Limited

Sipsynergy (via Hosted Network Services Ltd)

Summize Limited

TeraView Limited

185 550

- 5,125

1,2925,000

-2,600

-3,163

- 200

1,031 6,973

- 1,500

2501,500

-1,000

-6,600

1,050 6,300

400 3,400

- 1,207

10 30

- 802

549 3,783

- 1,000

2,197 6,384

- 1,000

1,500 9,000

1,000 3,500

- 3,450

1,675 8,201

- 5,000

- 1,000

1,322 7,000

- 1,000

1,551 6,250

- 3,000

-754

Tonkotsu Limited

220

3,075

2,225

1,560

1,898

130

3,565

900

750

500

3,960

3,150

1,800

302

10

481

1,778

500

2,512

500

4,500

1,500

2,070

3,916

3,000

500

3,407

500

2,654

1,800

377

2,388

145

2,050

1,483

1,040

1,265

70

2,377

600

500

2,640

2,100

1,200

905

10

321

1,456

500

1,675

500

3,000

1,000

1,380

2,610

2,000

500

2,271

500

2,045

1,200

377

1,592

9954,975

82

British Smaller Companies VCT plc Annual Report & Accounts

FINANCIAL STATEMENTS

Notes to the

Financial Statements

(continued)

British Smaller Companies VCT plc Annual Report & Accounts

83

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

British Smaller

Companies

VCT plc

£000

British Smaller

Companies

VCT2 plc

£000

Other commonly

managed

funds Total

£000 £000

Traveltek Group Holdings Limited

Unbiased EC1 Limited

Vuealta Holdings Limited

Vypr Validation Technologies Limited

Wooshii Limited

Xapien (via Digital Insight Technologies Ltd)

1,716

5,596

91

3,300

4,644

1,740

1,163

3,731

61

2,200

3,096

1,160

3,577 6,456

1,223 10,550

18 170

- 5,500

801 8,541

-2,900

Significant Holdings

Profit (loss)

before taxation

£million

Net assets

(liabilities)

£million

EL Support Services Limited

NB Technology Services Limited

Ncam Technologies Limited

OC Engineering Services Limited

SH Healthcare Services Limited

Sipsynergy (via Hosted Network Services Ltd)

SP Manufacturing Services Limited

Vuealta Holdings Limited

0.10

0.01

(1.94)

0.03

(0.30)

(0.62)

0.67

n/a

0.22

(0.13)

0.02

0.03

(0.31)

0.58

(0.98)

n/a

Information on Displayplan Holdings Limited is given on page 28 and ACC Aviation Group Limited is given on

page 29.

8.Accrued Income and Other Assets

2023 2022

£000 £000

Non-current assets:

Accrued income on financial assets

1,556907

Current assets:

Accrued income on financial assets

4798

Prepayments and other debtors

11452

161150

Non-current assets relates to income receivable on exit from the relevant investee company where this is expected

to be more than one year from the balance sheet date.

The carrying amounts of the Company’s accrued income are denominated in sterling.

9.Current Asset Investments and Cash and Cash Equivalents

2023 2022

£000 £000

Money market funds

7,5017,501

Bank deposits that mature after 3 months but are not immediately repayable

-6,970

Current asset investments

7,50114,471

Cash and cash equivalents

20,76638,928

Cash and cash equivalents

20,76638,928

10. Trade and Other Payables

2023 2022

£000 £000

Amounts payable within one year:

Incentive fee

125621

Accrued expenses

233166

358787

An amount of £125,000 has been accrued within trade and other payables in relation to the performance incentive

fee for the year ended 31 March 2023 (2022: £621,000 for the year ended 31 March 2022), as further explained in

note 3.

11. Called-up Share Capital

2023

Allotted,

called-up and

fully paid

£000

2022

Allotted,

called-up and

fully paid

£000

Ordinary shares of 10 pence

Issued 209,687,044 (2022: 205,095,127)

including 22,007,765 shares held in treasury

(2022: 18,834,982)

20,969

20,510

84

British Smaller Companies VCT plc Annual Report & Accounts

Notes to the

Financial Statements

(continued)

FINANCIAL STATEMENTS

British Smaller Companies VCT plc Annual Report & Accounts

85

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

The movements in the year were as follows:

Price

pence

Date

Number

of shares

Share

Capital

£000

Total as at 1 April 2022

205,095,127

20,510

Issue of sharesDRIS83.70

12 July 2022

1,029,555

103

Issue of sharesDRIS82.80

3 October 2022

1,054,908

105

Issue of sharesDRIS78.50

11 January 2023

2,507,454

251

As at 31 March 2023 (including treasury shares)

209,687,04420,969

As at 31 March 2023 (excluding treasury shares)

187,679,279

The movement in the previous year to 31 March 2022 was as follows:

Price

pence

Date

Number

of shares

Share

Capital

£000

Total as at 1 April 2021

161,310,848

16,131

Issue of shares

DRIS

73.80

23 July 2021

1,022,316

102

Issue of shares

DRIS

81.20

16 November 2021

2,306,826

231

Issue of shares

DRIS

83.90

5 January 2022

940,963

94

Issue of shares

Fundraising

86.05-92.20

7 January 2022

39,514,174

3,952

As at 31 March 2022 (including treasury shares)

205,095,12720,510

As at 31 March 2022 (excluding treasury shares)

186,260,145

During the year the Company purchased 3,172,783 (2022: 3,148,801) of its own shares and these shares are

held on the balance sheet in the Capital Reserve. Full details of the share purchases are set out in the Directors’

Report under the heading ‘Buy-Back and Issue of Shares’. The treasury shares have been included in calculating

the number of ordinary shares in issue, and excluded in calculating the number of ordinary shares with voting

rights in issue, at 31 March 2023 and 31 March 2022.

12. Basic and Diluted Net Asset Value per Ordinary Share

The basic and diluted net asset value per ordinary share is calculated on attributable assets of £157,032,000

(2022: £159,534,000) and 187,679,279 (2022: 186,260,145) ordinary shares in issue at the year end.

The treasury shares have been excluded in calculating the number of ordinary shares in issue at 31 March

2023.

The Company has no potentially dilutive shares and consequently, basic and diluted net asset values per

ordinary share are equivalent in both the years ended 31 March 2023 and 31 March 2022.

13. Total Return per Ordinary Share

The Total Return per ordinary share is calculated on cumulative dividends paid of 174.9 pence per ordinary

share (2022: 166.4 pence per ordinary share) plus the net asset value as calculated per note 12.

14. Financial Commitments

There are no financial commitments at 31 March 2023 or 31 March 2022.

15. Events after the Balance Sheet Date

On 4 April 2023 the Company allotted shares from its fully subscribed 2022/23 share offer. £44.3 million was

raised by the Company, resulting in the allotment of 53,559,905 ordinary shares. This increased the number of

ordinary shares issued with voting rights to 241,239,184.

Following the year end, one follow-on investment of £0.8 million has been completed into Relative Insight, and the

Company realised its investment in Ncam, in line with the valuation at 31 March 2023, with initial proceeds of £1.4

million being received.

16. Financial Instruments

The Company has no derivative financial instruments and has no financial asset or liability for which hedge

accounting has been used in either year. The Company classifies its financial assets as either fair value through

profit or loss or at amortised cost, and its financial liabilities, primarily accrued expenses, at amortised cost.

It is the directors’ opinion that the carrying value of financial assets and liabilities approximates their fair value.

Therefore, the directors consider all assets and liabilities to be carried at a valuation which equates to fair value.

Investments are made in a combination of equity, fixed rate and variable rate financial instruments so as to

comply with VCT legislation and provide potential future capital growth. Surplus funds are held in bank deposits or

money market funds until suitable qualifying investment opportunities arise.

The Company has reviewed all contracts for embedded derivatives that are required to be separately accounted for

if they do not meet certain criteria set out in the standard. No embedded derivatives have been identified by the

Company.

The accounting policies for financial instruments have been applied to the items below:

Assets as per balance sheet

Other

assets at

amortised

cost

£000

2023

Assets at

fair value

through profit

or loss

£000

Other

assets at

amortised

cost

£000

2022

Assets at

fair value

through profit

or loss

£000

Non-current assets at fair value through profit or loss

Financial assets

-

128,962

-

106,772

Current assets

Cash and cash equivalents

20,766

-

38,928

-

Cash on fixed term deposit

-

6,970

-

Current asset investments

7,501

-

7,501

-

Accrued income on financial assets

-

6

-

95

Accrued income on cash, cash equivalents

and cash deposits

41

-

3

-

28,308

128,968

53,402

106,867

Other assets – not financial instruments

114

-

52

-

28,422

128,968

53,454

106,867

86

British Smaller Companies VCT plc Annual Report & Accounts

Notes to the

Financial Statements

(continued)

FINANCIAL STATEMENTS

British Smaller Companies VCT plc Annual Report & Accounts

87

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

Liabilities as per balance sheet

2023

Other

financial

liabilities

£000

2022

Other

financial

liabilities

£000

Trade and other payables

(233)

(166)

Performance incentive fee

(125)

(621)

(358)

(787)

Assets classified as fair value through profit or loss were designated as such upon initial recognition.

The Company’s investing activities expose it to various types of risk that are associated with the financial

instruments and markets in which it invests. The most important types of financial risk to which the Company is

exposed are market risk, credit risk and liquidity risk. The nature and extent of the financial instruments outstanding at

the balance sheet date and the risk management policies employed by the Company are discussed below. There

have been no changes since last year in the objectives, policies, and processes for managing and measuring risks

facing the Company.

16a Market Risk

Market Price Risk

The Company invests in new and expanding businesses, the shares of which may not be traded on the stock

market. Consequently, exposure to market factors, in relation to many investments, stems from market based

measures that may be used to value unlisted investments.

The market also defines the value at which investments may be sold. Returns are therefore maximised when

investments are bought or sold at appropriate times in the economic cycle.

Market price risk arises from uncertainty about the future prices of financial instruments held in accordance with the

Company’s investment objectives. It represents the potential loss that the Company might suffer through holding

market positions in the face of market movements. In addition, the ability of the Company to purchase or sell

investments is also constrained by requirements set down for VCTs.

Of the Company’s financial assets through profit or loss, 3 per cent (2022: 4 per cent) are investment funds listed on

the main market of the London Stock Exchange (including FCA authorised and regulated UCITS funds). A 5 per

cent increase in stock prices as at 31 March 2023 would have increased the net assets attributable to the

Company’s shareholders and the total profit for the year by £202,000 (2022: £235,000). An equal change in the

opposite direction would have decreased the net assets attributable to the Company’s shareholders and the total

profit for the year by an equal amount.

Of the Company’s financial assets through profit or loss, 97 per cent are in unquoted companies held at fair value

(2022: 96 per cent). The valuation methodology for these investments includes the application of externally

produced revenue and earnings multiples. Therefore the value of the unquoted element of the portfolio is also

indirectly affected by price movements on the listed market. Investments have been valued in line with the

Guidelines described within note 1. Those using revenue and earnings multiple methodologies include judgements

regarding the level of discount applied to that multiple. The effect of changing the level of discounts applied to the

multiples is considered in note 7 on page 78.

The largest single concentration of risk relates to the Company’s investment in Matillion Limited which constitutes

16.0 per cent (2022: 17.6 per cent) of the net assets attributable to the Company’s shareholders. The Board seeks to

mitigate this risk by diversifying the portfolio and monitors the status of all investments on an ongoing basis. The

average investment (excluding both those whose value has been reduced to nil and those managed on a

discretionary basis by Brewin Dolphin Securities Limited) is 2.2 per cent (2022: 2.0 per cent) of the value of net

assets.

88

British Smaller Companies VCT plc Annual Report & Accounts

Notes to the

Financial Statements

(continued)

FINANCIAL STATEMENTS

16. Financial Instruments (continued)

Comparison of Realised Proceeds to Unrealised Valuations

The table below shows a comparison of the realised proceeds to the unrealised valuations one year prior to sale,

for all disposals of unquoted investments over the last ten years.

Full disposal

Date of Disposal

Sale

Proceeds

£000

Valuation

£000

Increase

(decrease)

£000

Waterfall Services Limited

Dec-14

3,854

1,952

1,902

President Engineering Group Limited

Jul-15

7,534

4,071

3,463

Insider Technologies (Holdings) Limited

Oct-15

1,159

880

279

Callstream Group Limited

Mar-16

785

773

12

Go Outdoors Topco Limited

Nov-16 & Apr-11

20,849

9,932

10,917

Cambrian Park & Leisure Homes Limited

Mar-17

-

1,876

(1,876)

Ness (Holdings) Limited

Mar-17

229

764

(535)

Selima Holding Company Ltd

May-17

2,811

923

1,888

Harvey Jones Holdings Limited

Aug-17

970

1,113

(143)

PowerOasis Limited

Sep-18

-

273

(273)

GTK (Holdco) Limited

Dec-18

3,751

2,738

1,013

Mangar Health Limited

Dec-18

5,513

3,962

1,551

Gill Marine Holdings Limited

Dec-18

3,802

2,569

1,233

Leengate Holdings Limited

Apr-19

1,936

1,769

167

Eikon Holdco Limited (partial realisation)

Oct-19

6,314

2,250

4,064

Business Collaborator Limited

Mar-20

8,085

3,662

4,423

RMS Group Holdings Limited

Jun-20

1,446

907

539

Bagel Nash Group Limited

Oct-20

150

607

(457)

Deep-Secure Ltd

Jul-21

6,560

2,956

3,604

Arraco Global Markets Limited

Sep-22

-

1,625

(1,625)

Sep-22

6,119

4,600

1,519

Intelligent Office UK

(via IO Outsourcing Limited)

Springboard Research Holdings Limited

Sep-22

8,673

6,186

2,487

Vuealta Group Limited (partial realisation)

Dec-22

4,601

3,092

1,509

Jan-23

972

278

694

Wakefield Acoustics

(via Malvar Engineering Limited)

Other

Dec-14 to Mar-23

94

-

94

96,207

59,758

36,449

British Smaller Companies VCT plc Annual Report & Accounts

89

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

Interest Rate Risk

The Company’s venture capital investments include £3,385,000 (2022: £4,973,000) of loan stock in unquoted

companies. The majority of this loan stock at 31 March 2023 is at fixed rates to guard against fluctuations in

interest rates. As a result the Company is only exposed to cash flow interest rate risk on £610,000 (2022: £611,000) of

its loan stock portfolio.

The Company has some exposure to interest rates as a result of interest earned on bank deposits. Other financial

assets (being accrued income) and other financial liabilities (being accrued expenses) attract no interest.

A sensitivity analysis has not been performed as the amounts involved are not considered to be significant.

2023

2022

Weighted

average

interest rate

£000%

Weighted

average

time for

which rate

is fixed

Months

Weighted

average

interest rate

£000%

Weighted

average

time for

which rate

is fixed

Months

Fixed rate loan stock and

preference shares

8,2708.9

15

11,0237.4%

11

Cash on fixed term deposit

6,9701.9

2

6,9700.6%

3

Combined

15,2405.7

9

17,9934.8%

5

Exchange Rate Risk

Of the Company’s financial assets measured at fair value through profit or loss, 20 per cent (2022: 26 per cent) are

denominated in US dollars. A 5 per cent increase in the £:$ exchange rate at 31 March 2023 would have

decreased the net assets attributable to the Company’s shareholders and the total profit for the year by £1,200,000

(2022: £1,336,000). An equal change in the opposite direction would have increased the net assets attributable to

the Company’s shareholders and the total profit for the year by £1,326,000 (2022: £1,476,000).

16b Credit Risk

Credit risk is the risk that the counterparty to a financial instrument will fail to discharge an obligation or commitment

that it has entered into with the Company. The Manager has in place a monitoring procedure in respect of

counterparty risk which is reviewed on an ongoing basis. The carrying amounts of financial assets excluding equity

investments total £51,265,000 (2022: £80,808,000) which best represents the maximum credit risk exposure at

the balance sheet date.

The Company does not invest in floating rate instruments other than, on occasion, unquoted loan stock. Credit risk

on unquoted loan stock held within unlisted investments is considered to be part of market risk as disclosed above.

The fair value of other assets is not regarded as having changed due to the changes in credit risk in either year.

Credit risk arising on transactions with brokers relates to transactions awaiting settlement. Risk relating to unsettled

transactions is considered to be small due to the short settlement period involved and the high credit quality of the

brokers used. The Board monitors the quality of service provided by the brokers used to further mitigate this risk.

Bankruptcy or insolvency of the broker may cause the Company’s rights with respect to securities held by the

broker to be delayed or limited. The Manager monitors the Company’s risk by reviewing the broker’s internal

control reports on a regular basis.

16. Financial Instruments (continued)

The only significant assets not held at fair value are cash and cash equivalents, cash on fixed term deposit and

money market funds. The funds held by the Company are held across a number of financial institutions to spread the

risk. Bankruptcy or insolvency of these financial institutions may cause the Company’s rights with respect to the

funds held by the financial institutions to be delayed or limited. The financial institutions used by the Company are

large and reputable. Should the credit quality or the financial position of the financial institutions deteriorate

significantly the Manager will move the holdings to another financial institution. Any expected credit loss associated

with the balances are considered to be highly immaterial.

The Company holds a number of listed investment funds. Market disruption could delay the Company’s ability to

redeem these investments and their values may fall. The Manager and the Board monitor these investments on a

regular basis in conjunction with the Company’s Financial Adviser. The holdings are intended as medium to long-

term investments but they could be sold on the market if necessary.

The maturities of the loan stock portfolio are as follows:

2023

£000

2022

£000

<1 year

1-2 years

2-5 years

<1 year1-2 years

2-5 years

Unquoted loan investments600

1,175

1,610

2,800887

1,286

An aged analysis of the unquoted loan investments included above, which are past due but not individually

impaired, is set out below. For this purpose these loans are considered to be past due when any payment due

date under the loan’s contractual terms (such as payment of interest) is received late or missed. The full value of the

loan is given even though, in some cases, the only default is in respect of interest.

20232022

< 1 year

£000

1-2 years

£000

< 1 year 1-2 years

£000 £000

Loans to investee companies past due600

886

600886

16c Liquidity Risk

The risk to the Company relates to liabilities which fall due within one year. These liabilities are deemed immaterial

and as such the risk associated with them is minimal.

The Company needs to retain enough liquid resources to support the financing needs of its investment businesses. To

meet this aim the Company places its surplus funds in a mixture of bank interest deposit accounts, money market

funds and listed investment funds. Investments in liquid funds are held for the purpose of liquidity whilst waiting for

suitable qualifying investment opportunities to arise. The money market funds and listed investment funds are

closely monitored and could be realised at short notice if required, although there is some risk that redemptions

could be suspended in extreme market conditions.

The Company’s liquidity risk is managed on an ongoing basis by the Manager in accordance with policies and

procedures in place. The cash requirements of the Company in respect of each investment are assessed at

monthly portfolio meetings.

The Company’s overall liquidity risks are monitored on a quarterly basis by the Board. The Company maintains

sufficient investments in cash and readily realisable securities to pay accounts payable and accrued expenses. Of

the Company’s assets 20.6 per cent (2022: 36.4 per cent) are in the form of liquid funds. There are no undrawn

committed borrowing facilities at either year end. The Company does not have a material amount of liabilities at the

year end.

90

British Smaller Companies VCT plc Annual Report & Accounts

Notes to the

Financial Statements

(continued)

FINANCIAL STATEMENTS

British Smaller Companies VCT plc Annual Report & Accounts

91

17. Capital Management

The Company’s objectives when managing capital are:

>to safeguard its ability to continue as a going concern, so that it can continue to provide returns for

shareholders and benefits for other stakeholders; and

>to ensure sufficient liquid resources are available to meet the funding requirements of its investments and

to fund new investments where identified.

The Company has no external debt; consequently all capital is represented by the value of share capital, distributable

and other reserves. Total shareholder equity at 31 March 2023 was £157,032,000 (2022: £159,534,000).

In order to maintain or adjust its capital structure the Company may adjust the amount of dividends paid to

shareholders, return capital to shareholders, issue new shares or sell assets.

There have been no changes in capital management objectives or the capital structure of the business from the

previous year. The Company is not subject to any externally imposed capital requirements.

18. Related Party Transactions

Fees payable during the year to the directors and their interests in the shares of the Company are disclosed within the

Directors’ Remuneration Report on page 50. There were no amounts outstanding and due to the directors at 31

March 2023 (2022: £nil).

Strategic Report

Financial Overview

Corporate Governance

Independent Auditor’s Report

Financial Statements

Company Information

92

British Smaller Companies VCT plc Annual Report & Accounts

Company Information

an allotment of equity securities by virtue of Section

560(3) of the Act as if in the first sentence of this

Resolution the words “pursuant to the general

authority conferred upon the directors in Resolution

9 above” were omitted.

(12) That conditional upon the passing of Resolution 10

above and in addition to existing authorities, the

directors of the Company be and hereby are

empowered pursuant to Section 571 of the Act to

allot or make offers or agreements to allot equity

securities (which expression shall have the meaning

ascribed to it in Section 560(1) of the Act) for cash

pursuant to the authority granted by Resolution 10

above, as if Section 561 of the Act did not apply to

any such allotment and so that:

(a)reference to allotment of equity securities in

this Resolution shall be construed in

accordance with Section 560(2) of the Act; and

(b)the power conferred by this Resolution shall

enable the Company to make any offer or

agreement before the expiry of the said power

which would or might require equity securities

to be allotted after the expiry of the said power

and the Directors may allot equity securities in

pursuance of any such offer or agreement

notwithstanding the expiry of such power.

The power provided by this Resolution shall expire

on the later of 15 months from the passing of this

Resolution or the next Annual General Meeting of

the Company (unless previously revoked, varied or

extended by the Company in general meeting)

(13) That in substitution for any existing authority but

without prejudice to the exercise of any such power

prior to the date hereof, the Company be generally

and unconditionally authorised to make one or more

market purchases (within the meaning of Section

693(4) of the Act of ordinary shares of 10 pence in

the capital of the Company provided that:

a. The maximum aggregate number of ordinary

shares that may be purchased is 36,161,754

being 14.99 per cent of the issued ordinary

shares (excluding treasury shares) as at 16

June 2023;

b.The maximum price (excluding expenses)

which may be paid for an ordinary share is an

amount equal to the maximum amount

permitted to be paid in accordance with rules

of the UK Listing Authority in force as at the

date of purchase;

c. The minimum price (excluding expenses)

which may be paid for an ordinary share is its

nominal value;

d.This authority shall take effect from 14

September 2023 and shall expire at the

conclusion of the Company’s Annual General

Meeting in 2026 or on 14 September 2026,

whichever is the later; and

e.The Company may make a contract or

contracts to purchase ordinary shares under

this authority before the expiry of the authority,

which will or may be executed wholly or partly

after the expiry of the authority, and may make

a purchase of ordinary shares in pursuance of

any such contract or contracts.

By order of the Board

The City Partnership (UK) Limited

Company Secretary

16 June 2023

Registered office:

5th Floor, Valiant Building, 14 South Parade, Leeds LS1 5QS

Information regarding the Annual General Meeting, including the

information required by section 311A of the Companies Act 2006, is

available from www.bscfunds.com.

94

British Smaller Companies VCT plc Annual Report & Accounts

Notice of the

Annual General Meeting

(continued)

Company Information

British Smaller Companies VCT plc Annual Report & Accounts

95

Park Valley Mills, Meltham Road, Huddersfield, HD4

7BH. In the case of a member which is a company,

the revocation notice must be executed under its

common seal or signed on its behalf by an officer of

the company or an attorney for the company. Any

power of attorney or any other authority under which

the revocation notice is signed (or a duly certified

copy of such power or authority) must be included

with the revocation notice. The revocation notice

must be received by The City Partnership before the

Annual General Meeting or the holding of a poll

subsequently thereto. If a member attempts to

revoke their proxy appointment but the revocation is

received after the time specified then, subject to note

(g) directly below, the proxy appointment will remain

valid.

(g)Completion and return of a Form of Proxy will not

preclude a member of the Company from attending

and voting in person. If a member appoints a proxy

and that member attends the Annual General

Meeting in person, the proxy appointment will

automatically be terminated.

(h)Copies of the directors’ Letters of Appointment, the

Register of Directors’ Interests in the ordinary shares

of the Company, and a copy of the current articles of

association of the Company will be available for

inspection at the registered office of the Company

during usual business hours on any weekday

(weekends and public holidays excluded) from the

date of this Notice, until the end of the Annual

General Meeting and at the Annual General Meeting

venue itself for at least 15 minutes prior to and during

the meeting.

(i)Pursuant to Regulation 41 of the Uncertificated

Securities Regulations 2001, the Company has

specified that only those holders of the Company’s

shares registered on the Register of Members of the

Company as at close of business on 13 June 2023

or, in the event that the Annual General Meeting is

adjourned, on the Register of Members at close of

business on the day two days before the time of any

adjourned meeting, shall be entitled to attend and

vote at the said Annual General Meeting in respect

of such shares registered in their name at the

relevant time. Changes to entries on the Register of

Members after close of business on 13 June 2023

or, in the event that the Annual General Meeting is

adjourned, on the Register of Members less than 48

hours before the time of any adjourned meeting,

shall be disregarded in determining the right of any

person to attend and vote at the Annual General

Meeting.

(j)As at 16 June 2023 the Company’s issued share

capital comprised 241,239,184 ordinary shares of 10

pence each with a further 22,007,765 shares held in

treasury. Those treasury shares represented 8.4 per

cent of the total issued share capital (including

treasury shares) at the aforementioned date. Each

ordinary share carries one voting right at the Annual

General Meeting of the Company and so the total

number of voting rights in the Company as at 16

June 2023 was 241,239,184. The website referred

to above will include information on the number of

ordinary shares and voting rights.

(k)If you are a person who has been nominated under

section 146 of the Companies Act 2006 to enjoy

information rights (“Nominated Person”):

•You may have a right under an agreement

between you and the member of the Company

who has nominated you to have information

rights (“Relevant Member”) to be appointed or

to have someone else appointed as a proxy for

the Annual General Meeting;

•If you either do not have such a right or if you

have such a right but do not wish to exercise

it, you may have a right under an agreement

between you and the Relevant Member to give

instructions to the Relevant Member as to the

exercise of voting rights;

•Your main point of contact in terms of your

investment in the Company remains the

Relevant Member (or, perhaps your custodian

or broker) and you should continue to contact

them (and not the Company) regarding any

changes or queries relating to your personal

details and your interest in the Company

(including any administrative matters). The only

exception to this is where the Company

expressly requests a response from you.

(l)A company which is a member can appoint one or

more corporate representatives who may exercise,

on its behalf, all its powers as a member provided

that no more than one corporate representative

exercises powers over the same share.

(m) In the case of joint members, any one of them may

sign the Form of Proxy. The vote of the person

whose name stands first in the register of members

of the Company will be accepted to the exclusion of

the votes of the other joint holders.

(n)A vote withheld is not a vote in law, which means that

the vote will not be counted in the calculation of votes

for or against the resolution. If no voting indication is

given on the Form of Proxy, the proxy will vote or

96

British Smaller Companies VCT plc Annual Report & Accounts

abstain from voting at their discretion. The proxy will

vote (or abstain from voting) as they think fit in

relation to any other matter which is put before the

Annual General Meeting.

(o)Members may not use any electronic address

provided either in this Notice of Annual General

Meeting, or any related documents (including the

Chairman’s letter and Form of Proxy), to

communicate with the Company for any purposes

other than those expressly stated.

(p)CREST members who wish to appoint a proxy or

proxies through the CREST electronic proxy

appointment service may do so by using the

procedures described in the CREST Manual.

CREST Personal Members or other CREST

sponsored members, and those CREST members

who have appointed a service provider(s), should

refer to their CREST sponsor or voting service

provider(s), who will be able to take the appropriate

action on their behalf. In order for a proxy

appointment or instruction made using the CREST

service to be valid, the appropriate CREST message

(a “CREST Proxy Instruction”) must be properly

authenticated in accordance with Euroclear UK &

Ireland’s specifications, and must contain the

information required for such instruction, as

described in the CREST Manual (available via

www.euroclear.com/CREST).Themessage,

regardless of whether it constitutes the appointment

of a proxy or is an amendment to the instruction

given to a previously appointed proxy must, in order

to be valid, be transmitted so as to be received by

the issuer’s agent (8RA57) not less than 48 hours

(excluding weekends and public holidays) before the

time of the Annual General Meeting. For this

purpose, the time of receipt will be taken to be the

time (as determined by the time stamp applied to the

message by the CREST Application Host) from

which the issuer’s agent is able to retrieve the

message by enquiry to CREST in the manner

prescribed by CREST. After this time any change of

instructions to proxies appointed through CREST

should be communicated to the appointee through

other means.

Notice of the

Annual General Meeting

(continued)